HON HAI PRECISION INDUSTRY CO., LTD. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT ACCOUNTANTS
JUNE 30, 2009 AND 2010
For the convenience of readers and for information purpose only, the auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. In the event of any discrepancy between the English version and the original Chinese version or any differences in the interpretation of the two versions, the Chinese-language auditors’ report and financial statements shall prevail.
~ 1 ~ REVIEW REPORT OF INDEPENDENT ACCOUNTANTS TRANSLATED FROM CHINESE
To The Board of Directors and Stockholders: Hon Hai Precision Industry Co., Ltd.
We have reviewed the accompanying consolidated balance sheets of Hon Hai Precision Industry Co., Ltd. and its subsidiaries as of June 30, 2009 and 2010, and the related consolidated statements of income, of changes in stockholders’equity and of cash flows for the six-month periods then ended, expressed in thousands of New Taiwan dollars. These financial statements are the responsibility of the Company’s management. Our responsibility is to issue a report on these financial statements based on our reviews. We did not review the financial statements of certain consolidated subsidiaries which statements reflect total assets of $173,622,645,000 and $184,674,091,000, constituting 19.27% and 14.50% of the consolidated total assets as of June 30, 2009 and 2010, respectively, and total revenues of $106,045,007,000 and $102,976,059,000, constituting 13.06% and 8.59% of the consolidated total operating revenues for the six-month periods then ended, respectively. Those statements were reviewed by other auditors, whose reports thereon have been furnished to us, and our conclusion expressed herein, insofar as it relates to the amounts included for these subsidiaries, is based solely on the reports of the other auditors.
Except as explained in the following paragraph, we conducted our reviews in accordance with the Statement of Auditing Standards No. 36, "Review of Financial Statements" in the Republic of China. A review consists principally of inquiries of company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards in the Republic of China, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
As described in Notes 1(2) and 4(8), the financial statements of certain consolidated subsidiaries and long-term equity investments accounted for under the equity method and certain information disclosed in Note 11 were not reviewed by independent accountants, which statements reflect total assets (including long-term equity investments) of $224,115,144,000 and $280,104,664,000, constituting 24.88% and 21.99% of the consolidated total assets, and total liabilities of $80,670,377,000 and $129,159,537,000, constituting 17.03% and 16.58% of the consolidated total liabilities as of June 30, 2009 and 2010, respectively, as well as total net income (including investment income accounted for under the equity method) of $4,365,112,000 and
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$9,049,762,000, constituting 15.45% and 26.95% of the consolidated net income for the six-month periods then ended, respectively.
Based on our reviews and the reports of other auditors, except for the effect of such adjustments, if any, as might have been determined to be necessary had the financial statements of certain consolidated subsidiaries and long-term investments been reviewed as explained in the preceding paragraph, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with the "Rules Governing the Preparation of Financial Statements by Securities Issuers" and generally accepted accounting principles in the Republic of China.
As described in Note 3, effective January 1, 2009, the Company and subsidiaries adopted the amendments to R.O.C. SFAS No. 10, “Accounting for Inventories”.
As disclosed in Note 2, the consolidated financial statements of Hon Hai Precision Industry Co., Ltd. and its subsidiaries as of and for the six-month period ended June 30, 2010 expressed in U.S. dollars are presented solely for the convenience of the reader and were translated from the financial statements expressed in New Taiwan dollars using the exchange rate of U.S.$1.00:NT$32.27, the noon buying rate in the City of New York for cable transfers in NT dollars per U.S. dollars as certified for custom purposes by the Federal Reserve Bank of New York as of June 30, 2010. This basis of translation is not in accordance with generally accepted accounting principles in the Republic of China.
PricewaterhouseCoopers, Taiwan August 24, 2010
The accompanying consolidated financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles generally accepted in countries and jurisdictions other than the Republic of China. The standards, procedures and practices in the Republic of China governing the audit of such financial statements may differ from those generally accepted in countries and jurisdictions other than the Republic of China. Accordingly, the accompanying consolidated financial statements and report of independent accountants are not intended for use by those who are not informed about the accounting principles or auditing standards generally accepted in the Republic of China, and their applications in practice. As the financial statements are the responsibility of the management, PricewaterhouseCoopers cannot accept any liability for the use of, or reliance on, the English translation or for any errors or misunderstandings that may derive from the translation.
~ 3 ~ HON HAI PRECISION INDUSTRY CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JUNE 30, (EXPRESSED IN THOUSANDS OF DOLLARS) (UNAUDITED) 2009 2010 2010 NT$ NT$ US$ (Note 2) ASSETS Current Assets Cash and cash equivalents (Note 4 (1)) $ 125,055,296 $ 249,758,233 $ 7,739,642 Financial assets at fair value through profit or loss - current (Note 4 (2)) 374,131 110,270 3,417 Available-for-sale financial assets - current (Note 4 (3)) 1,177,962 1,054,860 32,689 Notes receivable, net (Notes 4 (4)) 1,536,868 18,738,666 580,684 Accounts receivable, net (Notes 4 (4) ) 245,834,055 350,336,955 10,856,428 Accounts receivable, net - related parties (Note 5) 15,635,304 17,491,873 542,047 Other receivables (Notes 4(5) and 5) 16,933,789 28,195,618 873,741 Inventories, net (Notes 3 and 4 (6)) 167,106,229 253,195,564 7,846,159 Prepayments (Note 5) 4,584,239 5,941,376 184,115 Deferred income tax assets - current (Note 4 (14)) 2,571,345 2,327,151 72,115 580,809,218 927,150,566 28,731,037 Funds and Investments Available-for-sale financial assets - non-current (Note 4 (3)) 13,652,341 12,743,732 394,910 Financial assets carried at cost - non-current (Note 4 (7)) 1,324,699 2,148,152 66,568 Long-term equity investments accounted for under the equity method (Note 4 (8)) 28,623,380 33,401,829 1,035,074 Prepaid long-term investment(Note4(8)) - 33,033 1,024 Other financial assets - non-current (Note 6) 85,145 23,481,870 727,668 43,685,565 71,808,616 2,225,244 Property, Plant and Equipment (Notes 4 (9) and 5) Cost Land 3,703,839 3,885,454 120,405 Buildings and improvements 100,691,528 115,607,973 3,582,522 Machinery 154,980,995 160,765,871 4,981,899 Molding equipment 2,847,581 3,150,875 97,641 Testing equipment 19,678,538 21,577,499 668,655 Office equipment 12,776,776 13,748,520 426,046 Tooling equipment 3,093,551 3,246,397 100,601 Other equipment 27,339,279 31,477,981 975,456 Cost and revaluation 325,112,087 353,460,570 10,953,225 Less: Accumulated depreciation ( 105,281,210) ( 131,005,767) ( 4,059,677) Accumulated impairment ( 2,565,150) ( 3,623,071) ( 112,273) Construction in progress and prepayments for equipment 29,215,002 23,354,417 723,719 246,480,729 242,186,149 7,504,994 Intangible Assets (Note 4 (10)) Goodwill 1,345,627 215,474 6,677 Other intangible assets 653,575 316,356 9,804 1,999,202 531,830 16,481 Other Assets Deferred charges 5,175,561 5,482,188 169,885 Other assets - other (Notes 4(11) and 6) 22,763,368 26,574,145 823,494 27,938,929 32,056,334 993,379 TOTAL ASSETS $ 900,913,643 $ 1,273,733,495 $ 39,471,134 (continued)
~ 4 ~ HON HAI PRECISION INDUSTRY CO., LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (CONTINUED) JUNE 30, (EXPRESSED IN THOUSANDS OF DOLLARS) (UNAUDITED) 2009 2010 2010 NT$ NT$ US$ (Note 2) LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities Short-term loans (Note 4 (12)) $ 43,913,266 $ 171,430,469 $ 5,312,379 Financial liabilities at fair value through profit or loss - current (Note 4 (2)) 52,153 73,246 2,270 Accounts payable 257,404,594 398,200,552 12,339,651 Accounts payable - related parties (Note 5) 18,547,701 21,104,777 654,006 Income tax payable (Note 4 (14)) 10,677,771 12,811,552 397,011 Accrued expenses (Notes 4 (13)(19)) 35,631,509 50,632,926 1,569,040 Dividends payable (Note 4 (21)) 8,156,086 17,157,864 531,697 Payables for equipment (Note 5) 3,550,164 6,670,426 206,707 Other payables (Note 4 (21)) 6,351,030 5,972,878 185,091 Receipts in advance 4,033,596 2,377,013 73,660 Long-term liabilities - current portion (Note 4 (15)) 17,855,921 6,000,000 185,931 Accrued warranty liabilities 4,619,446 10,191,835 315,830 Other current liabilities 3,473,030 4,513,049 139,853 414,266,267 707,136,587 21,913,126 Long-term Liabilities Bonds payable (Note 4 (15)) 16,680,000 29,539,400 915,383 Long-term loans (Note 4 (16)) 33,958,350 33,275,250 1,031,151 50,638,350 62,814,650 1,946,534 Other Liabilities Reserve for retirement plan (Note 4 (17)) 1,057,958 1,066,104 33,037 Deferred income tax liabilities - non-current (Note 4 (14)) 5,626,818 3,634,823 112,638 Other liabilities - other 2,149,772 4,437,183 137,502 8,834,548 9,138,110 283,177 Total liabilities 473,739,165 779,089,347 24,142,837 Stockholders’ Equity Stockholders’ Equity of Parent Company Capital stock (Note 4 (18)) Common stock 85,789,319 85,789,319 2,658,485 Stock dividends distributable - 15,744,046 487,885 Capital reserve (Note 4 (20)) Paid-in capital in excess of par value of common stock 23,670,255 23,670,255 733,507 Capital reserve from conversion of convertible bonds 18,482,483 18,482,483 572,745 Capital reserve from long-term investments 13,274,789 14,339,295 444,354 Capital reserve from conversion right (Note 4 (15)) 1,195,200 1,195,200 37,037 Retained earnings (Note 4 (21)) Legal reserve 36,537,436 44,105,947 1,366,779 Undistributed earnings 181,506,260 228,531,220 7,081,848 Other adjustments of stockholders’ equity Unrealized gain or loss on financial instruments (Note 4 (3)) 12,258,097 11,298,347 350,119 Cumulative translation adjustments 20,670,043 16,705,017 517,664 Treasury stock ( 18,901) ( 18,901) ( 586) Total Stockholders’ equity of parent company 393,364,981 459,842,228 14,249,837 Minority interest 33,809,497 34,801,920 1,078,460 Total stockholders’ equity 427,174,478 494,644,148 15,328,297 Commitments and Contingent Liabilities (Note 7) Subsequent Events (Note 9) TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 900,913,643 $ 1,273,733,495 $ 39,471,134 The accompanying notes are an integral part of these consolidated financial statements. See review report of independent accountants dated August 24, 2010.
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HON HAI PRECISION INDUSTRY CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE SIX-MONTH PERIODS ENDED JUNE 30, (EXPRESSED IN THOUSANDS OF DOLLARS, EXCEPT EARNINGS PER SHARE DATA) (UNAUDITED) 2009 2010 2010 NT$ NT$ US$ (Note 2) Operating revenues Sales (Note 5) $ 812,453,508 $ 1,198,835,545 $ 37,150,156 Sales returns ( 335,449) ( 473,517) ( 14,673) Sales discounts ( 15,545) ( 3,089) ( 96) Net operating revenues 812,102,514 1,198,358,939 37,135,387 Operating costs Cost of goods sold (Notes 3, 4 (6)(23) and 5) ( 736,225,492) ( 1,098,192,650) ( 34,031,381) Gross profit 75,877,022 100,166,289 3,104,006 Operating expenses (Notes 4 (19)(23)) Sales and marketing expenses ( 14,096,367) ( 21,904,546) ( 678,790) General and administrative expenses ( 17,811,468) ( 21,406,010) ( 663,341) Research and development expenses ( 11,306,922) ( 16,851,638) ( 522,207) Total operating expenses ( 43,214,757) ( 60,162,194) ( 1,864,338) Operating income 32,662,265 40,004,095 1,239,668 Non-operating income and gains Interest income 413,045 1,263,826 39,164
Investment income accounted for under the equity method (Note 4 (8)) 652,659 873,244 27,061 Foreign exchange gain - net 1,831,519 1,078,289 33,415 Other non-operating income (Notes 5) 1,832,288 2,958,573 91,681 Total non-operating income and gains 4,729,511 6,173,932 191,321 Non-operating expenses and losses Interest expense ( 1,419,161) ( 952,730) ( 29,524) Loss on valuation of financial assets (Note 4 (2)) ( 45,513) ( 63,023) ( 1,953) Loss on valuation of financial liabilities (Note 4 (2)) ( 206,048) - - Financing charges (Note 4 (4)) ( 8,754) ( 50,756) ( 1,573) Impairment loss (Notes 4(7)(8)(9)(10)) ( 1,325,354) ( 2,138,288) ( 66,262) Other non-operating losses ( 754,277) ( 472,138) ( 14,631) Total non-operating expenses and losses ( 3,759,107) ( 3,676,935) ( 113,943) Income before income tax 33,632,669 42,501,092 1,317,046 Income tax expense (Note 4 (14)) ( 5,383,973) ( 8,926,218) ( 276,610) Consolidated net income $ 28,248,696 $ 33,574,874 $ 1,040,436 Attributable to: Equity holders of the Company $ 28,377,469 $ 34,738,417 $ 1,076,493 Minority interest ( 128,773) ( 1,163,543) ( 36,057) $ 28,248,696 $ 33,574,874 $ 1,040,436
Before After Before After Before After income income income income income income tax tax tax tax tax tax Earnings per common share (Note 4 (22)) Basic earnings per common share Consolidated net income $ 3.50 $ 2.94 $ 4.42 $ 3.49 $ 0.14 $ 0.11 Minority interest (income) loss ( 0.01) 0.01 0.11 0.12 - - Net income attributable to equity holders of the Company $ 3.49 $ 2.95 $ 4.53 $ 3.61 $ 0.14 $ 0.11 Diluted earnings per common share Consolidated net income $ 3.47 $ 2.92 $ 4.38 $ 3.46 $ 0.14 $ 0.11 Minority interest (income) loss ( 0.01) 0.01 0.10 0.12 - - Net income attributable to equity holders of the Company $ 3.46 $ 2.93 $ 4.48 $ 3.58 $ 0.14 $ 0.11 The accompanying notes are an integral part of these consolidated financial statements. See review report of independent accountants dated August 24, 2010.
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HON HAI PRECISION INDUSTRY CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY FOR THE SIX-MONTH PERIODS ENDED JUNE 30, (EXPRESSED IN THOUSANDS OF DOLLARS) (UNAUDITED) Other Adjustments of Capital stock Retained Earnings Stockholders’ Equity Unrealized gain or Cumulative Stock dividends Capital Undistributed loss on financial translation Treasury Minority Common stock distributable reserves Legal reserve earnings instruments adjustments stock interest Total 2009 - New Taiwan Dollars Balance at January 1, 2009 $ 74,146,236 $ - $ 52,944,370 $ 31,024,118 $ 177,920,130 $ 4,727,053 $ 20,423,841 ($ 18,901) $ 33,153,976 $ 394,320,823 Appropriation of 2008 earnings Legal reserve - - - 5,513,318 ( 5,513,318) - - - - - Cash dividends - - - - ( 8,156,086) - - - - ( 8,156,086) Stock dividends 11,121,935 - - - ( 11,121,935) - - - - - Employees’ stock bonus 521,148 - 3,448,441 ------3,969,589 Consolidated net income for the period - - - - 28,377,469 - - - ( 128,773) 28,248,696 Unrealized gain on financial assets - - - - - 6,025,809 - - - 6,025,809 Adjustments due to changes in equities of long-term investments - - 229,916 - - 1,505,235 - - - 1,735,151 Cumulative translation adjustment ------246,202 - - 246,202 Minority interest ------784,294 784,294 Balance at June 30, 2009 $ 85,789,319 $ - $ 56,622,727 $ 36,537,436 $ 181,506,260 $ 12,258,097 $ 20,670,043 ($ 18,901) $ 33,809,497 $ 427,174,478
2010 - New Taiwan Dollars Balance at January 1, 2010 $ 85,789,319 $ - $ 57,308,705 $ 36,537,436 $ 228,813,896 $ 16,902,917 $ 14,522,082 ($ 18,901) $ 34,855,525 $ 474,710,979 Appropriation of 2009 earnings (Note) Legal reserve - - - 7,568,511 ( 7,568,511) - - - - - Cash dividends - - - - ( 17,157,864) - - - - ( 17,157,864) Stock dividends - 10,294,718 - - ( 10,294,718) - - - - - Employees’ stock bonus - 5,449,328 ------5,449,328 Consolidated net income for the period - - - - 34,738,417 - - - ( 1,163,543) 33,574,874 Unrealized loss on financial assets - - - - - ( 4,726,494) - - - ( 4,726,494) Adjustments due to changes in equities of long-term investments - - 378,528 - - ( 878,076) - - - ( 499,548) Cumulative translation adjustment ------2,182,935 - - 2,182,935 Minority interest ------1,109,938 1,109,938 Balance at June 30, 2010 $ 85,789,319 $ 15,744,046 $ 56,687,233 $ 44,105,947 $ 228,531,220 $ 11,298,347 $ 16,705,017 ($ 18,901) $ 34,801,920 $ 494,644,148
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Other Adjustments of Capital stock Retained Earnings Stockholders’ Equity Unrealized gain or Cumulative Stock dividends Capital Undistributed loss on financial translation Treasury Minority Common stock distributable reserves Legal reserve earnings instruments adjustments stock interest Total 2010-US Dollars (Unaudited) ( Note 2) Balance at January 1, 2010 $ 2,658,485 $ - $ 1,775,913 $ 1,132,242 $ 7,090,607 $ 523,797 $ 450,018 ($ 586) $ 1,080,122 $ 14,710,598 Appropriation of 2009 earnings ------Legal reserve - - - 234,537 ( 234,537) - - - - - Cash dividends - - - - ( 531,697) - - - - ( 531,697) Stock dividends - 319,018 - - ( 319,018) - - - - - Employees’ stock bonus - 168,867 ------168,867 Consolidated net income for the period - - - - 1,076,493 - - - ( 36,057) 1,040,436 Unrealized loss on financial assets - - - - - ( 146,467) - - - ( 146,467) Adjustments due to changes in equities of ------long-term investments Cumulative translation adjustment - - 11,730 - - ( 27,211) - - - ( 15,481) Minority interest ------67,646 - - 67,646 Balance at June 30, 2010 ------34,395 34,395 $ 2,658,485 $ 487,885 $ 1,787,643 $ 1,366,779 $ 7,081,848 $ 350,119 $ 517,664 ($ 586) $ 1,078,460 $ 15,328,297
Note: Directors’ and supervisors’ remuneration and employees’ bonus in the amounts of $0 and $5,449,328, respectively, have been deducted from the consolidated statements of income.
The accompanying notes are an integral part of these consolidated financial statements. See review report of independent accountants dated August 24, 2010.
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HON HAI PRECISION INDUSTRY CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX-MONTH PERIODS ENDED JUNE 30, (EXPRESSED IN THOUSANDS OF DOLLARS) (UNAUDITED) 2009 2010 2010 NT$ NT$ US$ (Note 2) CASH FLOWS FROM OPERATING ACTIVITIES Consolidated net income $ 28,248,696 $ 33,574,874 $ 1,040,436 Adjustments to reconcile consolidated net income to net cash provided by operating activities: Depreciation 16,989,664 17,057,001 528,572 Amortization of intangible and other assets 2,548,636 2,135,992 66,191 Provision (reversal of allowance) for doubtful accounts 1,160,211 ( 579,040) ( 17,944) Loss (gain) on disposal of property, plant and equipment, net 21,721 ( 188,675) ( 5,847) Loss on impairment 1,325,354 2,138,288 66,262 Gain on valuation of financial assets and liabilities, net ( 38,332) ( 22,024) ( 682) Provision for inventory obsolescence and market price decline 1,189,326 439,587 13,622 Investment income accounted for under the equity method ( 652,659) ( 873,244) ( 27,061) Amortization of discount of convertible bonds payable 197,563 - - Gain on disposal of investments - ( 12,544) ( 389) Changes in assets and liabilities: Financial assets at fair value through profit or loss ( 155,142) - - Notes receivable ( 562,018) ( 7,972,139) ( 247,045) Accounts receivable 4,588,854 ( 72,064,076) ( 2,233,160) Accounts receivable - related parties ( 844,267) 1,653,423 51,237 Inventories ( 1,570,361) ( 70,555,562) ( 2,186,413) Other receivables 1,728,472 ( 4,051,771) ( 125,558) Prepayments ( 921,155) ( 1,420,232) ( 44,011) Accounts payable 4,958,635 116,478,491 3,609,498 Accounts payable - related parties 4,889,755 2,297,286 71,190 Accrued expenses ( 3,748,423) 5,685,707 176,192 Accrued warranty liabilities 97,463 2,547,598 78,946 Receipts in advance 1,714,887 ( 1,353,489) ( 41,943) Income tax payable ( 1,932,291) ( 426,306) ( 13,210) Accrued pension liabilities 30,453 ( 13,139) ( 407) Other payables and other current liabilities 2,540,519 2,082,349 64,529 Deferred income tax liabilities ( 2,428,536) ( 786,441) ( 24,371) Net cash provided by operating activities 59,377,025 25,771,914 798,634 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property, plant and equipment ( 17,162,856) ( 20,426,373) ( 632,983) Increase in other assets ( 1,141,738) ( 3,144,285) ( 97,437) Increase in long-term equity investments ( 235,000) ( 1,412,136) ( 43,760) Acquisition of land use right ( 336,870) ( 142,193) ( 4,406) Increase in other financial assets - non-current 34,056 ( 19,931,083) ( 617,635) Acquisition of financial assets carried at cost ( 30,000) ( 576,052) ( 17,852) Acquisition of subsidiary and assets, net of cash acquried - ( 3,768,001) ( 116,765) Proceeds from disposal of property, plant and equipment 1,350,917 1,173,296 36,359 Increase in financial assets / liabilities at fair value through profit or loss ( 227,506) ( 49,111) ( 1,522) Net cash used in investing activities ( 17,748,997) ( 48,275,938) ( 1,496,001) (Continued )
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HON HAI PRECISION INDUSTRY CO., LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE SIX-MONTH PERIODS ENDED JUNE 30, (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS) (UNAUDITED) 2009 2010 2010 NT$ NT$ US$ (Note 2) CASH FLOWS FROM FINANCING ACTIVITIES (Decrease) increase in short-term loans ($ 16,271,180) $ 91,351,358 $ 2,830,845 (Decrease) increase in other liabilities - others ( 248,884) 1,508,982 46,762 Increase in minority interest 784,294 1,109,938 34,395 Payment of employee’s bonus accumulated before 2008 - ( 932,136) ( 28,886) Net cash (used in) provided by financing activities ( 15,735,770) 93,038,142 2,883,116 Net effect of changes in foreign currency exchange rates 20,670 1,680,975 52,091 Net increase in cash and cash equivalents 25,912,928 72,215,093 2,237,840 Cash and cash equivalents at beginning of period 99,142,368 177,543,140 5,501,802 Cash and cash equivalents at end of period $ 125,055,296 $ 249,758,233 $ 7,739,642 Supplemental disclosures of cash flow information: Cash paid during the period for interest $ 1,499,601 $ 421,714 $ 13,068 Cash paid during the period for income tax $ 9.379.086 $ 10,069,796 $ 312,048 Cash paid for the acquisition of property, plant and equipment Increase in property, plant and equipment $ 12,614,653 $ 22,998,364 712,686 Add: Payable - beginning 8,068,285 4,058,968 125,781 Less: Payable - ending ( 3,550,164) ( 6,670,426) ( 206,707) Effect of changes in foreign currency exchange rates 30,082 39,467 1,223 Cash paid $ 17,162,856 $ 20,426,373 $ 632,983 Investing activities with no cash flow effect: Unrealized (loss) gain on financial instruments Adjustment for change in value of available-for-sale financial assets $ 6,025,809 ($ 4,726,494) ( 146,467) Evaluation of long-term investments accounted for under the equity method 1,505,235 ( 878,076) ( 27,211) $ 7,531,044 ($ 5,604,570) ($ 173,678) Financing activities with no cash flow effect: Cash dividends payable $ 8,156,086 $ 17,157,864 $ 531,697 Employees’ bonus payable $ 3,969,589 $ 5,449,328 $ 168,867 Fair value information of acquired subsidiary: Current assets $ - $ 2,093,844 $ 64,885 Property, plant and equipment - 2,189,168 67,839 Other assets - 15,048 466 Current liabilities - ( 203,784) ( 6,315) Other liabilities - ( 210,963) ( 6,537) Total purchase price - 3,883,313 120,338 Less: minority interest - ( 47,712) ( 1,478) Cash of subsidiary - ( 67,600) ( 2,095) Net assets of acquired subsidiary (less cash received) $ - $ 3,768,001 $ 116,765
The accompanying notes are an integral part of these consolidated financial statements. See review report of independent accountants dated August 24, 2010.
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HON HAI PRECISION INDUSTRY CO., LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2009 AND 2010 (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT AS OTHERWISE INDICATED) (UNAUDITED) 1. HISTORY AND ORGANIZATION 1) Hon Hai Precision Industry Co., Ltd. (the Company) was established on February 20, 1974. The Company began to be listed on the Taiwan Stock Exchange in June 1991. The Company merged with Premier Image Technology Corporation (Premier Corp.) on December 1, 2006. The Company’s issued and outstanding capital was $85,789,319. The main activities of the Company are the manufacture, processing and sales of connectors, cable, enclosures, wired/wireless communication products, optics products, power supply modules, and assemblies for use in the IT, communications, automotive equipment, precision molding, automobile, and consumer electronics industries. As of June 30, 2010, the Company and its subsidiaries had approximately 760,000 employees. 2) Consolidated subsidiaries A. Main activities of the subsidiaries and ownership of the Company: Relationship Ownership Names of with the Percentage (%) subsidiaries Company Main operating activities 2009.06.30 2010.06.30 Foxconn (Far Wholly-owned Investment holdings in 100% 100% East) Ltd. and subsidiary Mainland China, Europe subsidiaries and North America and Hong Kong electronics manufacturers Foxconn Holding Wholly-owned Investment holdings in Asia 100% 100% Ltd. and subsidiary Pacific and North America subsidiaries hi-tech companies Hyield Venture Majority-owned Venture capital investment 98% 98% Capital Co., Ltd. subsidiary company and investment and subsidiaries holdings in electronics manufactures Bao Shin Wholly-owned Domestic investment company 100% 100% International subsidiary and investment holdings in Investment companies engaged in Co., Ltd. and computer system and subsidiaries machinery business
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Relationship Ownership Names of with the Percentage (%) subsidiaries Company Main operating activities 2009.06.30 2010.06.30 Hon Yuan Wholly-owned Domestic investment company 100% 100% International subsidiary and investment holdings in Investment companies engaged in Co., Ltd. and computer system and subsidiaries machinery business Hon Chi Wholly-owned Domestic investment company 100% 100% International subsidiary and investment holdings in Investment companies engaged in IT and Co., Ltd. and machinery business subsidiaries Lin Yih Wholly-owned Investment holdings in R.O.C. 100% 100% International subsidiary companies Investment Co., Ltd. Hon Hai/ Wholly-owned Logistics services 100% 100% Foxconn subsidiary Logistics California LLC. Hon Hai/ Wholly-owned Logistics services 100% 100% Foxconn subsidiary Logistics Texas LLC. Ambit Wholly-owned Investment holdings in Mainland China 100% 100% International subsidiary companies Ltd. and subsidiaries Foxconn Wholly-owned Asia pacific sales 100% 100% Singapore subsidiary (Pte) Ltd. and subsidiaries Foxconn Wholly-owned Research and development 100% 100% International subsidiary Inc. Altus Technology Wholly-owned Manufacture and design of cellular 100% 100% Inc. subsidiary phone and camera lens and marketing of sensors
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Relationship Ownership Names of with the Percentage (%) subsidiaries Company Main operating activities 2009.06.30 2010.06.30 Premier Image Majority- Manufacture and sales of camera 99.96% 99.96% Technology owned -Hong Kong subsidiary Limited and subsidiaries Foxconn SA B.V. Majority- Investment holdings 95% 95% and subsidiaries owned subsidiary Image & Vision Wholly-owned Investment holdings 100% 100% Investment subsidiary Corporation Margini Holdings Wholly-owned Investment holdings of Vietnam 100% 100% Limited and subsidiary and Brazil process and both subsidiaries domestic and export sales companies Syntrend Majority- Manufacturing and marketing of 80% - Creative Park owned computer components, comput Co., Ltd. subsidiary A. The financial statements of certain consolidated subsidiaries as of and for the six-month periods ended June 30, 2009 and 2010 were not reviewed by independent accountants, which reflect total assets of $203,522,045 and $268,526,658, constituting 22.59% and 21.08% of the consolidated total assets, and total liabilities of $80,670,377 and $129,159,537, constituting 17.03% and 16.58% of the consolidated total liabilities, as of June 30, 2009 and 2010 respectively, as well as total net income of $3,751,757 and $9,067,458, constituting 13.28% and 27.01% of the consolidated net income for the six-month periods ended June 30 , 2009 and 2010, respectively. B. Changes in consolidated subsidiaries (1) In January, 2010 a subsidiary of the Company acquired 90% of Sony Corporation Baja California, S.A. De C.V, which was consolidated effective the acquisition date. (2) In May, 2010, the Company established and held 80% owenership in Syntrend Creative Park Co., Ltd., which was consolidated, effective the acquisition date. 3) Majority-owned subsidiaries those were not included in the consolidated financial statements: None. 4) Adjustments for subsidiaries with different balance sheet dates: None. 5) Special operating risks of the foreign subsidiaries: No significant special operating risks that would affect the financial statements. 6) Significant restriction on remittance of funds from the foreign subsidiaries to the Company: None. ～13～
7) The Company’s common stock owned by its subsidiary: As of June 30, 2009 and 2010, Hon Jin International Investment Co., Ltd. owned 961,344 and 961,344 shares, respectively, of the Company’s common stock at a cost of $18,901. 8) Information on new issuance of convertible bonds and common stock by subsidiaries: None. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying consolidated financial statements of the Company and its subsidiaries (collectively referred herein as the Group) are prepared in accordance with the “Rules Governing the Preparation of Financial Statements by Securities Issuers” and accounting principles generally accepted in the Republic of China. The Group’s significant accounting policies are summarized below: 1) Basis for preparation of consolidated financial statements A. All majority-owned subsidiaries and controlled entities are included in the consolidated financial statements. Effective January 1, 2008, the Company prepares consolidated financial statements on a quarterly basis. B. The income (loss) of the subsidiaries is included in (excluded from) the consolidated statement of income effective on the date the Company gains (loses) control over the subsidiaries. C. Significant intercompany transactions and assets and liabilities arising from intercompany transactions are eliminated. 2) Convenience translation into U.S. dollars The financial statements are stated in New Taiwan Dollars. Translation of the 2010 New Taiwan dollar amounts into U.S. dollar amounts is included solely for the convenience of the readers, using the Federal Reserve Bank of New York exchange rate on June 30, 2010 of NT$32.27 to US$1 uniformly applied for all the financial statements accounts. Such translation amounts are unaudited and should not be construed as representations that the New Taiwan Dollars amounts represent, have been, or could be converted into U.S. dollars at this rate or any other rate of exchange. 3) Translation of financial statements of foreign subsidiaries into New Taiwan Dollars Assets and liabilities of foreign subsidiaries are translated into New Taiwan dollars using the exchange rates at the balance sheet date. Equity accounts are translated at historical rates except for beginning retained earnings, which is carried forward from prior year’s balance. Dividends are translated at the rates prevailing at the date of declaration. Profit and loss accounts are translated at weighted-average rates of the year. The resulting translation differences are included in “cumulative translation adjustments” under stockholders’ equity. 4) Criteria for classifying assets and liabilities as current or non-current items A. Assets that meet one of the following criteria are classified as current assets; otherwise they are classified as non-current assets: 1) Assets arising from operating activities that are expected to be realized or consumed, or are intended to be sold within the normal operating cycle;
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2) Assets held mainly for trading purposes; 3) Assets that are expected to be realized within twelve months from the balance sheet date; and 4) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to be exchanged or used to pay off liabilities more than twelve months after the balance sheet date. B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they are classified as non-current liabilities: 1) Liabilities arising from operating activities that are expected to be paid off within the normal operating cycle; 2) Liabilities arising mainly from trading activities; 3) Liabilities that are to be paid off within twelve months from the balance sheet date; and 4) Liabilities for which the repayment date cannot be extended unconditionally to more than twelve months after the balance sheet date. 5) Use of estimates The preparation of financial statements in conformity with R.O.C. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as at the date of the financial statements and the amounts of revenues and expenses reported during the period. Actual results could differ from those assumptions and estimates. 6) Foreign currency transactions A. The Company and its consolidated subsidiaries maintain their accounts in New Taiwan dollars and functional currencies, respectively. Transactions denominated in foreign currencies are translated into New Taiwan dollars and their functional currencies at the spot exchange rates prevailing at the transaction dates. Exchange gains or losses due to the difference between the exchange rate on the transaction date and the exchange rate on the actual receipt and payment are recognized in current year’s profit or loss. B. Receivables, other monetary assets and liabilities denominated in foreign currencies are translated at the spot exchange rates prevailing at the balance sheet date. Exchange gains or losses are recognized in profit or loss. However, exchange gains or losses on overseas inter-company accounts that are, in nature, deemed long term is accounted for as a reduction in stockholders’ equity. C. When a gain or loss on a non-monetary item is recognized directly in equity, any exchange component of that gain or loss shall be recognized directly in equity. Conversely, when a gain or loss on a non-monetary item is recognized in profit or loss, any exchange component of that gain or loss shall be recognized in profit or loss. However, non-monetary items that are measured on a historical cost basis are translated using the exchange rate at the date of the transaction. 7) Cash equivalents Cash equivalents represent short-term, highly liquid investments which can be readily converted
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into fixed amount of cash and with a maturity period of less than three months. The statements of cash flows is compiled under the cash and cash equivalents basis. 8) Financial assets and financial liabilities at fair value through profit or loss A. Equity investments are recognized using trade date accounting. Debt instruments, beneficiary certificates and derivative financial instruments are recognized and derecognized using settlement date accounting. All are recognized initially at fair value. B. These financial instruments are subsequently remeasured and stated at fair value, and the gain or loss is recognized in profit or loss. The fair value of listed stocks, OTC stocks, closed-end mutual funds and deposit receipts is based on latest quoted fair prices of the accounting period. The fair value of open-end and balanced mutual funds is based on the net asset value at the balance sheet date. C. For derivatives that do not qualify for hedge accounting, if the derivative is an option, then the transaction is recognized at fair value on the trade date, and if the derivatives is not an option, then the transaction is recognized at zero fair value on the trade date. D. The derivative features (such as call options and put options) embedded in bonds payable issued by the Company is described in Note 2 (22). 9) Available-for-sale financial assets A. Equity investments are recognized using trade date accounting. Bond investments are recognized and derecognized using settlement date accounting and are recognized initially at fair value plus transaction costs that are directly attributable to the acquisition of the financial asset. B. Available-for-sale financial assets are remeasured and stated at fair value, and the gain or loss is recognized in equity. The fair value of listed stocks, OTC stocks, closed-end mutual funds and deposit receipts is based on latest quoted fair prices of the accounting period. The fair value of open-end and balanced mutual funds is based on the net asset value at the balance sheet date. C. If there is any objective evidence that the financial asset is impaired, the cumulative loss that had been recognized directly in equity shall be removed from equity and recognized in profit or loss. Impairment losses recognized previously in profit or loss for an investment in an equity instrument shall not be reversed through profit or loss, and if, subsequently, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in profit or loss, the impairment loss shall be reversed, with the amount of the reversal recognized in profit or loss. 10) Financial assets carried at cost A. Investment in unquoted equity instruments is recognized using trade date accounting and is recognized initially at its fair value plus transaction costs that are directly attributable to the acquisition of the financial asset. B. If there is any objective evidence that the financial asset is impaired, the impairment loss is recognized in profit or loss. Such impairment loss cannot be reversed. 11) Settlement date accounting If an entity recognizes financial assets using settlement date accounting, any change in the fair value of the asset to be received during the period between the trade date and the settlement date
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/ balance sheet date is not recognized for assets carried at cost or amortized cost. For financial asset or financial liability classified as at fair value through profit or loss, the change in fair value is recognized in profit or loss. For available-for-sale financial assets, the change in fair value is recognized directly in equity. 12) Accounts receivable Accounts receivable are claims resulting from the sale of goods or services. The fair value of accounts receivable is calculated based on the imputed interest rate. Accounts receivable which are collectible within one year, and where the difference between the fair value and the value at maturity is insignificant are measured at carrying value. 13) Allowance for doubtful accounts Allowance for doubtful accounts is provided based on past experience and the evaluation of the collectibility of accounts, notes and other receivables, taking into account the aging analysis of receivables. 14) Inventories Effective January 1, 2009, the Group adopted the amendments to R.O.C. SFAS No. 10, “Accounting for Inventories”. The perpetual inventory system is adopted for inventory recognition. Inventories are stated at cost. The cost is determined using the weighted-average method. At the end of period, inventories are evaluated at the lower of cost or net realizable value, and the individual item approach is used in the comparison of cost and net realizable value. The calculation of net realizable value is based on the estimated selling price in the normal course of business, net of estimated costs of completion and estimated selling expenses. As the value of raw materials declines and the cost of finished goods is over the net realizable value, the net realizable value of raw materials is determined based on current replacement cost. 15) Long-term equity investments accounted for under the equity method A. Long-term equity investments in which the Group holds more than 20% of the investee company’s voting shares or has the ability to exercise significant influence on the investee’s operational decisions are accounted for under the equity method. The excess of the initial investment cost over the acquired net asset value of the investee attributable to goodwill is no longer amortized from 2006. Retrospective adjustment of the amount of goodwill amortized in previous years is not required. Goodwill is subject to tests of impairment on an annual basis. The excess of acquired net asset value of investee over the initial investment cost is allocated proportionately and applied as a reduction to the book values of identifiable non-current assets, and any remaining amount of such excess after this allocation is credited to extraordinary gains. B. Long-term investment in which the Group holds more than 50% of the investee company’s voting shares or has the ability to control the investee’s operational decisions are accounted for under the equity method and included in the consolidated financial statements on a quarterly basis. C. For foreign investments accounted for under the equity method, the Group’s proportionate share of the investee company’s cumulative translation adjustment, resulting from translating the foreign investee company’s financial statements into New Taiwan Dollars, is recognized ～17～
by the Group and included as “cumulative translation adjustments” under stockholders' equity. 16) Property, plant and equipment A. Property, plant and equipment are stated at cost. Interest costs incurred on the loans used to bring the assets to the condition and location necessary for their intended uses are capitalized. Significant servicing or betterments capable of generating future economic benefits are capitalized and depreciated accordingly. Maintenance and repairs are expensed as incurred. B. Depreciation is provided on the straight-line method using the service life guidelines prescribed by the R.O.C. Government, which approximate the useful lives of the assets plus one year as residual value. Fully depreciated assets still in use are depreciated based on the residual values over the remaining useful lives. The useful lives of property, plant and equipment are 2 to 8 years, except for buildings which are 45 to 55 years. 17) Goodwill and other intangible assets A. The excess of the initial acquisition cost over the fair value of the acquired identifiable tangible and intangible assets is attributable to goodwill. B. Other intangible assets, mainly customer relationship, are stated at cost and amortized on a straight-line basis over 3 years. 18) Deferred charges and other assets A. The costs of telephone network installation charges, computer software, molding and tools equipment are recorded as deferred charges and amortized over their estimated economic lives on a straight-line basis. B. Land use rights are stated at cost and amortized over the lease period using the straight-line method. 19) Impairment of non-financial assets The Group recognizes impairment loss when there is indication that the recoverable amount of an asset is less than its carrying amount. The recoverable amount is the higher of the fair value less costs to sell and value in use. The fair value less costs to sell is the amount obtainable from the sale of the asset in an arm’s length transaction after deducting any direct incremental disposal costs. The value in use is the present value of estimated future cash flows to be derived from continuing use of the asset and from its disposal at the end of its useful life. When the impairment no longer exists, the impairment loss recognized in prior years shall be recovered. The recoverable amount of goodwill shall be evaluated periodically. Impairment loss will be recognized whenever there is indication that the recoverable amount of these assets is less than their respective carrying amount. Impairment loss of goodwill recognized in prior years is not recoverable in the following years 20) Warranty obligation Warranty obligation is recognized based on the estimated warranty cost per unit and the number of units sold during the period. 21) Pension plan Under the defined benefit pension plan, net periodic pension costs are recognized in accordance with the actuarial calculations. Net periodic pension costs include service cost, interest cost,
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expected return on plan assets, and amortization of unrecognized net transition obligation and gains or losses on plan assets. Unrecognized net transition obligation is amortized on a straight-line basis over 15 years. Under the defined contribution pension plan, net periodic pension costs are recognized as incurred. 22) Bonds payable For bonds issued with embedded conversion, put, or call option feature after January 1, 2006, the issuer shall bifurcate the issuance price based on the substance of the contractual arrangement on initial recognition, and recognized the elements separately as a financial asset, financial liability, or an equity instrument. These bonds are accounted for as follows: A. The difference between the issue price and face value of convertible corporate bonds is accounted for as premium or discount which is required to be amortized over the period from the date of issuance to maturity date using the interest method and is recorded as “interest expense”. B. The value of any derivative features (such as a call option and put option) embedded in the compound financial instrument is recognized as “financial assets or financial liabilities at fair value through profit or loss”. These derivative features are subsequently remeasured and stated at fair value on each balance sheet date, and the gain or loss is recognized in “gain or loss on valuation of financial assets or financial liabilities”. At the maturity of the redemption period, if the fair value of common stock exceeds the redemption price, the fair value of the put option is recognized as “capital reserve”; however, if the fair value of common stock is lower than the redemption price, the fair value of the put option is recognized as “gain or loss”. C. A conversion right embedded in the bonds issued by the Company, which is convertible to an equity instrument, is recognized in “capital reserve from stock conversion option”. When a bondholder exercises his/her conversion rights, the liability component of the bonds (including corporate bonds and embedded derivatives) shall be revalued at fair value on the conversion date, and the resulting difference shall be recognized as “gain or loss” in the current period. The book value of the common stock issued due to the conversion shall be based on the adjusted book value of the above-mentioned liability component plus the book value of the stock conversion option. D. Costs incurred on issuance of convertible bonds are proportionately charged to the liabilities and equities of the underlying instruments based on initial recognition amount. E. In the event that the bondholders may exercise put options within the following year, the underlying bonds payable shall be reclassified to current liabilities. The bonds payable whose put options are unexercised during the exercisable period shall be reclassified to non-current liabilities. 23) Income tax A. Income tax expense is provided based on accounting income after adjusting for permanent differences. The provision for income tax includes deferred income tax for the expected future tax consequences of events that have been included in different periods for financial
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or tax reporting purposes. Deferred income tax assets and liabilities are determined using enacted tax rates in effect for the year(s) in which the differences are expected to reverse. Valuation allowance on deferred income tax assets is recognized to the extent that it is more likely than not that the income tax benefits will not be realized. Over or under provision of income tax from the previous years is recorded as adjustment to the current year’s income tax expense. In accordance with the ROC Income Tax Law, the company’s undistributed income is subject to an additional 10% corporate income tax. The tax is charged to income tax expense after the appropriation of earnings is approved by the stockholders in the following year. B. Income tax credits are provided for in accordance with R.O.C. SFAS No. 12 "Accounting for Income Tax Credits". Income tax credits arising from acquisitions of equipment or technology, expenditures for research and development, training and development of employees and investments in qualified stocks are charged to deferred income tax assets and credited to income tax expense in the period the related expenditures are incurred. C. Effective January 1, 2006, the Company adopted the Income Basic Tax Act (the “Act”). Under the Act, the income tax payable shall be the higher of the basic tax and the regular income tax in accordance with the Income Tax Law and other relevant laws. D. As a result of the amendment of the Income Tax Law, the Company recalculated its deferred tax assets and liabilities and recorded the resulting difference in the current year income tax benefit or expense. 24) Government grants In accordance with R.O.C. SFAS No. 29 “Government Grants”, government grants related to assets are recognized as deferred income; for depreciable assets, it is recognized as income over the useful life period of the asset in the proportions in which depreciation expense on those assets is recognized, and for non-depreciable assets that require the fulfillment of certain obligations, it would then be recognized as income over the periods that bear the cost of meeting the obligations. If the government grant relates to receiving financial consideration, it is recognized as income when earned, or as deferred income and recognized in periods over which the grant will be earned. 25) Treasury stock A. When shares are bought back by the Company, the treasury stock is accounted for as a deduction of the equity. B. Any excess of the proceeds over the cost of the treasury stock reissued is recognized as an increase in additional paid-in capital from the treasury stock transaction and if the proceeds are less than the cost, the deficit is charged to the additional paid-in capital account. Should the paid-in capital in excess of par value of common stock balance be insufficient to absorb the deficit, the balance is charged to retained earnings. C. Treasury stock cost is determined using the weighted-average cost method. D. The Company's common stock owned by its subsidiaries is treated as treasury stock. 26) Share-based payment - employee compensation plan Based on the employee stock options and the share-based payment agreements, the Company
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shall measure the services received during the vesting period by reference to the fair value of the equity instruments granted and account for those amounts as payroll expenses during that period. 27) Employees’ bonuses and directors’ and supervisors’ remuneration Effective January 1, 2008, pursuant to EITF 96-052 of the Accounting Research and Development Foundation, R.O.C., dated March 16, 2007, “Accounting for Employees’ Bonuses and Directors’ and Supervisors’ Remuneration”, the costs of employees’ bonuses and directors’ and supervisors’ remuneration are accounted for as expenses and liabilities, provided that such recognition is required under legal or constructive obligation and the amounts can be estimated reasonably. However, if the accrued amounts for employees’ bonuses and directors’ and supervisors’ remuneration are significantly different from the actual distributed amounts resolved by the stockholders at their annual stockholders’ meeting subsequently, the differences shall be recognized as gain or loss in the following year. In addition, according to EITF 97-127 of the Accounting Research and Development Foundation, R.O.C., dated March 31, 2008, “Criteria for Listed Companies in Calculating the Number of Shares of Employees’ Stock Bonus”, the Company calculates the number of shares of employees’ stock bonus based on the closing price of the Company's common stock at the previous day of the stockholders’ meeting held in the year following the financial reporting year, after taking into account the effects of ex-rights and ex-dividends. 28) Earnings per share Basic earnings per share is calculated by dividing net income by the weighted-average number of shares outstanding during the period. Diluted earnings per share is calculated by taking into account the potentially dilutive securities which are assumed to have been converted to common stock at the beginning of the period. 29) Revenues and expenses Revenues are recognized when the earning process is substantially completed and are realized or realizable. Related costs are recognized to match the timing of revenue recognition. Expenses, including research and development costs, are recognized as incurred. 3. CHANGES IN ACCOUNTING PRINCIPLES Inventories Effective January 1, 2009, the Group adopted the amendments to R.O.C. SFAS No. 10, “Accounting for Inventories”. As a result of this change in accounting principle, the Group’s loss on market price decline increased by $573,717, consolidated net income decreased by $550,768 and earning per share decreased by $0.06 for the six-month period ended June 30, 2009. Furthemorer, as a result of thr reclassification of loss on market price decline, operating cost increased by $1,187,761 and non-operating loss associated with inventories decreased by $1,187,761 for the six-month period ended June 30, 2009.
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4. DETAILS OF SIGNIFICANT ACCOUNTS (1)Cash and cash equivalents June 30, 2009 2010 Cash on hand $ 7,386,942 $ 6,109,101 Checking accounts 284,268 430,137 Savings deposits 35,470,028 37,634,840 Time deposits 60,128,750 200,671,130 103,269,988 244,845,208 Cash equivalents 21,785,308 4,913,025 $ 125,055,296 $ 249,758,233
Cash equivalents include the Sweep Fund and short-term commercial paper and bonds purchased with resale agreements with maturity less than three months (2)Financial assets and liabilities at fair value through profit or loss June 30, 2009 Contract amount (Nominal principal) Book value (in thousands) Financial assets held for trading Gold futures contracts $ 282,963 - Open-end funds 15,000 - Forward exchange contracts-offset 4,893 USD(BUY) 65,000 BRL(SELL) 10,110 TWD(SELL) 1,634,600 JPY(SELL) 973,500 Forward exchange contracts-open 71,275 HUF(BUY) 282,300 JPY(BUY) 4,241,920 MXN(BUY) 150,197 RMB(BUY) 20,523 USD(BUY) 461,300 VND(BUY) 86,116,256 BRL(SELL) 3,910 EUR(SELL) 1,000 INR(SELL) 14,279 RMB(SELL) 3,135,440 USD(SELL) 62,859 $ 374,131
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June 30, 2009 Contract amount (Nominal principal) Book value (in thousands) Financial liabilities held for trading Forward exchange contracts-offset ($ 19,210) RMB(BUY) 67,940 RUB(BUY) 91,980 USD(BUY) 25,000 USD(SELL) 13,000 TWD(SELL) 327,050 BRL(SELL) 18,917 CZK(SELL) 114,468 Forward exchange contracts-open ( 32,943) EUR(BUY) 3,000 HUF(BUY) 1,100,340 JPY(BUY) 1,463,452 MXN(BUY) 26,288 USD(BUY) 336,784 BRL(SELL) 9,649 EUR(SELL) 11,000 HUF(SELL) 602,880 INR(SELL) 2,276 RMB(SELL) 2,188,240 USD(SELL) 21,090 ($ 52,153)
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June 30, 2010 Contract amount (Nominal principal) Book value (in thousands) Financial assets held for trading Gold futures contracts $ - - Open-end funds 15,000 - Forward exchange contracts-open 95,270 BRL(BUY) 5,591 EUR(BUY) 4,102 JPY(BUY) 451,875 MXN(BUY) 465,944 USD(BUY) 119,696 VND(BUY) 126,452,500 BRL(SELL) 20,606 EUR(SELL) 16,500 INR(SELL) 316,119 JPY(SELL) 1,700,000 MXN(SELL) 75,760 RMB(SELL) 430,126 USD(SELL) 48,227 $ 110,270 Financial liabilities held for trading Forward exchange contracts-open ($ 73,246) BRL(BUY) 6,144 EUR(BUY) 2,000 HUF(BUY) 420,600 JPY(BUY) 20,425 MXN(BUY) 25,194 USD(BUY) 22,008 BRL(SELL) 16,559 EUR(SELL) 7,800 INR(SELL) 258,870 RMB(SELL) 8,277 USD(SELL) 6,789 ($ 73,246) 1) For the six-month period ended June 30, 2010, the Group recognized a net loss of $63,023, including unrealized gain of $22,024. 2) For the six-month period ended June 30, 2009, the Group recognized a net loss of $251,561 including unrealized gain of $38,332.
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(3) Available-for-sale financial assets June 30, 2009 2010 Current items: Listed stocks $ 72,093 $ 64,230 Adjustment of available-for-sale financial assets 1,105,869 990,630 $ 1,177,962 $ 1,054,860 Non-current items: Listed stocks $ 5,267,667 $ 4,864,592 Adjustment of available-for-sale financial assets 8,384,674 7,879,140 $ 13,652,341 $ 12,743,732 The fair value of available-for-sale financial assets increased by $7,531,044 and decreased by $5,604,570 for the six-month periods ended June 30, 2009 and 2010, respectively, and is shown as an adjustment to stockholders’ equity as unrealized gain or loss on financial instruments. (4) Notes and accounts receivable - third parties June 30, 2009 Allowance for
Amount doubtful accounts Net amount Notes receivable $ 1,611,465 ($ 74,597) $ 1,536,868 Accounts receivable 249,617,481 ( 3,783,426) 245,834,055 $251,228,946 ($ 3,858,023) $247,370,923
June 30, 2010 Allowance for
Amount doubtful accounts Net amount Notes receivable $ 18,739,262 ($ 596) $ 18,738,666 Accounts receivable 353,543,220 ( 3,206,265) 350,336,955 $372,282,482 ($ 3,206,861) $369,075,621 1. The Group factored its accounts receivable to certain financial institutions without recourse. Under the agreement, the Group is not required to bear uncollectible risk of the underlying accounts receivable, but is liable for the losses incurred on any business dispute, and did not provide any collateral. Accordingly, these accounts receivable meet the derecognition criteria for financial assets. The Group has derecognized the accounts receivable sold to financial institutions, net of the amount estimated for business disputes. As of June 30, 2009 and 2010, the relevant information of accounts receivable factored but unsettled were as follows:
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June 30, 2009 Accounts Interest receivable rate sold/ Amount Institutions (%) derecognized advanced Amount retained Limit Mega International 0.55 $ 1,104,057 $ 1,104,057 $ - $ 16,405,000 Commercial Bank Taipei Fubon Bank 0.60 1,072,887 1,072,887 - 22,967,000 $ 2,176,944 $ 2,176,944 $ - $ 39,372,000
June 30, 2010 Accounts Interest receivable rate sold/ Amount Institutions (%) derecognized advanced Amount retained Limit Mega International 1.08 $12,164,947 $12,164,947 $ - $ 16,075,000 Commercial Bank Taipei Fubon Bank 1.35 21,058,250 21,058,250 - 32,150,000 Mizuho Corporate 0.86 6,430,000 6,430,000 - 6,430,000 Bank Sumitomo Mitsui 1.20 4,822,500 4,822,500 - 11,252,500 Banking Corporation ING Bank N.V. 1.18 2,250,500 2,250,500 - 6,430,000 Standard Chartered Commercial Bank 1.00 3,858,000 3,858,000 - 3,858,000 $50,584,197 $50,584,197 $ - $ 76,195,500
2. For the six-month periods ended June 30, 2009 and 2010, the financing charges (expenses) incurred from accounts receivable factoring were $8,754 and $50,756 (shown as “financing charges”), respectively. (5) Other receivables June 30, 2009 2010 Tax refund receivable $ 11,737,375 $ 22,845,005 Receivables for payments made on behalf of others 1,355,040 1,292,752 Amount retained on accounts receivable sold 726,025 1,070,136 Dividends receivable 216,361 288,607 Others 2,898,988 2,699,118 $ 16,933,789 $ 28,195,618
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(6) Inventories June 30, 2009 2010 Raw materials and supplies $ 60,584,809 $ 105,767,589 Work in process 33,862,101 53,817,602 Finished goods 68,755,683 81,267,929 Inventory in transit 13,627,231 22,467,833 176,829,824 263,320,953 Less: Allowance for inventory obsolescence and market ( 9,723,595 ( 10,125,389 price decline ) ) $ 167,106,229 $ 253,195,564 Expenses and loss incurred on inventories for the six-month periods ended June 30, 2009 and 2010 were as follows: For the six-month periods
ended June 30, 2009 2010 Cost of inventories sold $ 735,037,731 $ 1,097,753,063
Loss on inventory obsolescence and market price decline 1,189,326 416,458 ( 1,565 Others ) 23,129 $ 736,225,492 $ 1,098,192,650 (7) Financial assets carried at cost June 30, Name of investee company 2009 2010 Diamondhead Ventures Ltd. $ 307,732 $ 333,692 Riverhood Capital Partners L.P. - 203,541 Global Strategic Investment Inc. 200,400 200,400 Aptlna Acquisition L.P. - 169,875 Wimm. Labs Incorporated - 160,750 Shenzhen Yuto Printing Co., Ltd. - 122,802 Entire Technology Co., Ltd. 148,489 - Others 668,078 957,092 $ 1,324,699 $ 2,148,152 1) The Group recognized impairment loss in the amounts of $0 and $120,864 (shown as “impairment loss”) for the six-month periods ended June 30 2009 and 2010, respectively, on its investment accounted for under the equity method. 2) Entire Technology Co., Ltd., one of the company’s investee companies, becomes listed in August 2009. Acordingly, the company reclassified such investment to “Available-for-sale financial assets - non-current”. 3) These investments have no active quoted market price and their fair values cannot be measured ～27～
reliably. Therefore, they were measured at cost. (8) Long-term equity investments accounted for under the equity method June 30, 2010 Ownership June 30, Investee Company Percentage (%) 2009 2010 Foxconn Technology Co., Ltd. 31 $ 13,541,065 $ 14,532,305 Foxconn Advanced Technology, Ltd.- Cayman 43 3,719,846 5,522,080 Pan International Industrial Corporation 27 3,545,718 3,473,691 Simplo Technology Co., Ltd. 9 1,730,200 1,824,044 Ampower Holding Limited - Cayman 45 1,237,740 1,187,604 Ways Technical Corp., Ltd. 24 1,129,884 1,148,195 Multiwin Precision Ind. Co. Ltd. 29 - 1,114,215 G-Tech Optoelectronics Corporation 42 725,397 787,619 CyberTAN Technology, Inc. 11 523,799 561,498 Mediamarkt (China) International 25 - 643,000 Retail Holding Limited-HK Uer Holding Corporation-Cayman 40 - 395,824 Alliance Fiber Optic Products Inc. 20 321,758 332,992 Diabell Co., Ltd. 20 283,831 313,193 Others 1,864,142 1,565,569 28,623,380 33,401,829 Add: Prepaid long-term investment - 33,033 $ 28,623,380 $ 33,434,862
1) The consolidated financial statements included investment income accounted for under the equity method of $613,355, and investment loss accounted for under the equity method of $17,696, constituting 2.17% and 0.05% of the consolidated net income for the six-month periods ended June 30, 2009 and 2010, respectively, and the related long-term investments of $20,593,099 and $11,578,006, constituting 2.29% and 0.91% of the consolidated total assets as of June 30, 2009 and 2010, respectively. These amounts were based on the financial statements of the investee companies for the same periods which were not audited or reviewed by independent accountants. 2) The Group recognized impairment loss amounting to $65,155 and $145,846 (shown as “impairment loss”) for the six-month periods ended June 30, 2009 and 2010 on its investment accounted for under the equity method.
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(9) Property, plant and equipment June 30, 2009 Accumulated Net Original cost depreciation book value Land $ 3,703,839 $ - $ 3,703,839 Buildings and improvements 100,691,528 ( 15,707,025) 84,984,503 Machinery 154,980,995 ( 57,115,468) 97,865,527 Molding equipment 2,847,581 ( 2,390,516) 457,065 Testing equipment 19,678,538 ( 10,488,760) 9,189,778 Furniture and fixtures 12,776,776 ( 7,212,083) 5,564,693 Tooling equipment 3,093,551 ( 1,465,840) 1,627,711 Miscellaneous equipment 27,339,279 ( 10,901,518) 16,437,761 Prepayments for equipment and construction in progress 29,215,002 - 29,215,002 $ 354,327,089 ($105,281,210) 249,045,879 ( 2,565,150 Less: Accumulated impairment ) $246,480,729
June 30, 2010 Accumulated Net Original cost depreciation book value Land $ 3,885,454 $ - $ 3,885,454 Buildings and improvements 115,607,973 ( 20,986,808) 94,621,165 Machinery 160,765,871 ( 69,356,995) 91,408,876 Molding equipment 3,150,875 ( 2,342,506) 808,369 Testing equipment 21,577,499 ( 13,353,637) 8,223,862 Furniture and fixtures 13,748,520 ( 8,643,827) 5,104,693 Tooling equipment 3,246,397 ( 1,550,751) 1,695,646 Miscellaneous equipment 31,477,981 ( 14,771,243) 16,706,738 Prepayments for equipment and construction in progress 23,354,417 - 23,354,417 $ 376,814,987 ($131,005,767) 245,809,220 ( 3,623,071 Less: Accumulated impairment ) $242,186,149 The Group recognized impairment loss of $ 299,949 and $772,770 (shown as “impairment loss”) for the six-month periods ended June 30, 2009 and 2010, respectively. (10) Intangible assets 1) Business acquisition On January 1, 2010, the Company acquired from Sony Corporation a portion of its Mexico
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plant’s production equipment and 90% ownership of its subsidiary, Sony BAJA California, S.A.DE C.V., for a cost of US$119,900 thousand.
Fair value information of acquired subsidiary: Current assets $ 2,093,844 Property, plant and equipment 2,189,168 Other assets 15,048 Current liabilities ( 203,784) Other liabilities ( 210,963) Total purchase price 3,883,313 Less: minority interest ( 47,712) Cash of subsidiary ( 67,600) Net assets of acquired subsidiary (less cash received) $ 3,768,001
2) Goodwill For the six-month periods ended June 30, 2009 2010 Net book value, January 1 $ 2,291,662 $ 1,317,381 Impairment loss ( 960,250) ( 1,098,808) Cumulative translation adjustments 14,215 ( 3,099) Net book value, June 30 $ 1,345,627 $ 215,474 A.The above amount mainly represents goodwill arising from the company’s subsidiary’s acquisition of Chi Mei Communication System, Inc. in 2005. B.The Company’s subsidiary recognized impairment loss on its goodwill amounting to $960,250 and $1,098,808 (shown as “impairment loss”) for the six-month period ended June 30, 2009 and 2010, respectively. 3) Other intangible assets – customer relationship In February 2008, the Company’s subsidiary, Foxteq Holding Inc. – Cayman, signed an assets purchase agreement with Sanmina-SCI Corporation, Sanmina- SCI USA Inc., SCI Technology, Inc., Sanmina- SCI Systems De Mexico S.A. De C.V., Sanmina- SCI Hungary Electronics Manufacturing LLC. and Sanmina- SCI Australia Pty Ltd. for the acquisition of certain assets and liabilities of these companies. The acquisition cost was US$70 million. The acquisition was effective on July 7, 2008. The intangible assets – customer relationship arising from the above acquisition, amounted to $965,100, which were appraised by the Company and experts. The changes in the intangible assets – customer relationship for the six-month periods ended June 30, 2009 and 2010, respectively, are set forth below:
June 30, 2009 2010
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Net book value, January 1 $ 818,688 $ 476,011 Amortization in current year ( 169,042) ( 160,776) Cumulative translation adjustments 3,929 1,121 Net book value, June 30 $ 653,575 $ 316,356 (11) Other assets June 30, 2009 2010 Land use rights $ 19,247,580 $ 21,030,475 Others 3,515,788 5,543,670 $ 22,763,368 $ 26,574,145 For the six-month periods ended June 30, 2009 and 2010, the land use rights were as follows: For the six-month
periods ended June 30, 2009 2010 Net book value, January 1 $ 19,091,762 $ 21,088,073 Increase in current year 336,870 142,193 Amortization in current year ( 182,021)( 219,678) Cumulative translation adjustments 969 19,887 Net book value, June 30 $ 19,247,580 $ 21,030,475 (12) Short-term loans June 30, 2009 2010 Credit loans $ 43,913,266 $ 170,733,532 Secured loans - 696,937 $ 43,913,266 $ 171,430,469 Interest rates per annum 0.31% ~ 5.8% 0.32% ~ 6.83% (13) Accrued expenses June 30, 2009 2010 Awards and salaries payable $ 9,602,716 $ 14,719,728 Royalty fees payable 3,100,545 6,197,670 Business Tax (VAT) payable 2,803,946 3,756,244 Employees’ bonuses payable 2,043,192 2,501,042 Welfare fees payable 2,263,325 2,391,179 Shipping fees payable 2,035,558 2,830,050 Fees payable for tooling 177,886 1,731,712 Tax payable (excluding VAT) 969,280 1,463,152 Consumption goods expense payable 903,055 1,382,515 Interest payable 394,326 708,641 Molding payable 770,121 456,051
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Others 10,567,559 12,494,942 $ 35,631,509 $ 50,632,926
(14) Income tax 1) Income tax expense and income tax payable are reconciled as follows: June 30, 2009 2010 Income tax expense $ 5,383,973 $ 8,926,218 Changes in deferred income tax 2,428,536 786,441 Less: Prepaid income tax and income tax withheld ( 631,136) ( 676,727) Over provision of prior years' income tax 974,235 610,388 Add: Income tax payable at the beginning of the period 2,522,163 3,165,232 Income tax payable $ 10,677,771 $ 12,811,552 2) As of June 30, 2009 and 2010, the deferred income tax assets and liabilities were as follows: June 30, 2009 2010 Deferred income tax assets $ 3,041,259 $ 3,631,617 Deferred income tax liabilities ($ 6,096,732) ($ 4,939,289) 3) The temporary differences and related amounts of deferred tax assets (liabilities) are listed as follows: June 30, 2009 2010 Amount Tax effect Amount Tax effect Current items: Allowance for doubtful accounts $ 1,999,061 $ 399,813 $ 729,941 $ 125,518 Reserve for inventory obsolescence and market price decline 6,088,015 1,269,142 5,290,360 1,054,560 Unrealized exchange 6,797 1,445 ( 2,661,952) ( 450,175) losses(gains) Product warranty 3,986,275 797,255 8,748,191 1,537,256 Others 522,583 103,690 ( 143,985) 59,992 $12,602,731 2,571,345 $ 11,962,555 2,327,151 Non-current items: Reserve for pension cost $ 831,116 166,223 $ 838,832 142,601 Foreign investment income accounted for under the equity method ( 30,483,661)( 6,096,732) ( 26,358,845) ( 4,489,114) Others 1,129,520 303,691 2,846,764 711,690 ～32～
June 30, 2009 2010 Amount Tax effect Amount Tax effect ($28,523,025)( 5,626,818)($22,673,249) ( 3,634,823) ($3,055,473) ($1,307,672) 4) As of June 30, 2010, the Company’s and Premier’s income tax returns have been approved by the R.O.C. Tax Authority through 2007 and 2006, respectively. (15) Bonds payable June 30, 2009 2010 2006 1st domestic convertible bonds payable $ 18,000,000 $ 12,039,400 Less: Discount on bonds payable ( 144,079) - 17,855,921 12,039,400 First unsecured corporate bonds issue in 2005 11,500,000 11,500,000 First debenture issuing of 2008 5,180,000 5,180,000 First debenture issuing of 2009 - 6,820,000 34,535,921 35,539,400 Less: Current portion ( 17,855,921) ( 6,000,000) Bonds payable – long term $ 16,680,000 $ 29,539,400 1) 2006 1st domestic convertible bonds payable A. On September 1, 2006, following the approval from the SFB, the Company issued domestic zero coupon unsecured bonds in the amount of $18,000,000. These convertible bonds cover a period of five years from November 10, 2006 to November 10, 2011. B. The conversion price shall be adjusted based on the terms of the convertible bonds. As of June 30, 2010, the convertible bonds have not been converted. The conversion price was adjusted to $161.62 (in dollars) per share due to the declaration of based on the resolution approved at the stockholders’ meeting in 2009. C. Under the terms of the convertible bonds, all the stock dividends redeemed or converted bonds will be retired and not to be re-issued. D. The bondholders may require the Company to redeem any bond at face value three years after the issuance. On November 10, 2009, bondholders have redeemed total of $5,960,600. E. Under the terms of the convertible bonds, the rights and obligations of the new shares converted from convertible bonds are the same as those of the issued and outstanding common stock. F. The effective interest rate of the bonds was 2.32%. G. The discount on convertible bonds is amortized during the expected outstanding period of 3 years, using the interest methods. Since November 10, 2009, the bonds have no longer
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had outstanding discount. H. The fair value of conversion right in the amount of $1,195,200 was separated from bonds payable at issuance date, and was recognized in “Capital reserve from conversion right” in accordance with SFAS No. 36. 2) First unsecured corporate bonds issue in 2005 A) On September 14, 2005, following the approval from the SFB, the Company issued domestic unsecured bonds in the amount of $11,500,000. The terms of these domestic unsecured bonds are summarized as follows:
Nominal Type of bonds Issuance date Period Amount interest rate Payment term Bond Aa to Af September 2005 5 years $ 500,000 1.9800% Principal is due at maturity. Interest is paid annually at simple interest rate. Bond Ba to Bf September 2005 5 years $ 500,000 1.9703% Principal is due at maturity. Interest is compounded semi-annually and paid annually. Bond Ca to Cf September 2005 7 years $ 500,000 2.2500% Principal is due at maturity. Interest is paid annually at simple interest rate. Bond Da to De September 2005 10 years$ 500,000 2.3700% Principal is due at maturity. Interest is paid annually at simple interest rate.
B) Bond Aa to Af and Bond Ba to Bf of 2005 1st unsecured bonds payables had been reclassified to “Current liabilities” in the third quarter of 2009. 3) First debenture issue of 2008 On December 9, 2008, following the approval from the SFB, the Company issued domestic unsecured bonds in the amount of $5,180,000. The terms of these domestic unsecured bonds are summarized as follows: Nominal Issuance date Period Amount interest rate Payment term December 2008 3 years $ 5,180,000 2.5% Principal is due at maturity. Interest is paid annually at simple interest rate. 4) First debenture issuing of 2009 On January 12, 2009, following the approval from the SFB, the Company issued domestic unsecured bonds in the amount of $6,820,000. The terms of these domestic unsecured bonds are summarized as follows.
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Nominal Issuance date Period Amount interest rate Payment term October 2009 5 years $ 6,820,000 1.7% Pay half of principal each in the fourth and fifth year. Interest is paid annually at simple interest rate. (16) Long-term loans Institution Loan period June 30, 2009 Limit Mizuho Corporate Bank 2008/8/21~2011/8/21 $ 17,553,350 (USD 535,000,000) Ltd., etc. syndicated loan 〞 2008/9/11~2013/9/11 16,405,000 (USD 500,000,000) $ 33,958,350 4.2288%~4.8438 Interest rate %
Institution Loan period June 30, 2010 Limit Mizuho Corporate Bank 2008/8/21~2011/8/21 $ 17,200,250 (USD 535,000,000) Ltd., etc. syndicated loan 〞 2008/9/11~2013/9/11 16,075,000 (USD 500,000,000) $ 33,275,250 0.7472%~0.7972 Interest rate %
1) The Company’s subsidiary entered into a syndicated credit facility agreement with Mizuho Corporate Bank Ltd. as the lead bank and obtained a credit line in the amount of US$1,035,000 thousand. The Company is the guarantor of the loan. 2) As the contract period of the loan is over twelve months, it was recognized as long-term loan. 3) Throughout the term of the syndicated term loan agreement, the Group shall maintain the following financial ratios, to be tested semi-annually and annually on an audited consolidated basis: A. The current ratio shall not be less than one hundred percent (100%). B. The ratio of total net debt to consolidated tangible net assets shall not exceed seventy percent (70%). C. The interest coverage (income before income tax plus depreciation, amortization and interest expense divided by net interest expense) shall not be less than five hundred percent (500%). D. Net debt is defined as total debt deducted by cash and cash equivalents. E. The consolidated net tangible assets are defined as the consolidated total net assets of the
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Group deducted by goodwill acquired through merger and acquisition. F. Net interest expense is defined as interest expense deducted by interest income. The Company has not breached any of the above financial ratio commitments under the syndicated loan agreement. (17) Retirement plan 1) The Company has a non-contributory and funded defined benefit pension plan in accordance with the Labor Standards Law, covering all regular employees. The Company contributes monthly an amount equal to 2.1% of the employees’ monthly salaries and wages to the retirement fund deposited with Bank of Taiwan, the trustee, under the name of the independent retirement fund committee. The pension expenses under the defined benefit plan amounted to $34,795 and $29,795 for the six-month periods ended June 30, 2009 and 2010, respectively. The balance of the fund which is deposited with Bank of Taiwan was $552,318 and $583,664 as of June 30, 2009 and 2010, respectively. 2) In accordance with the Labor Pension Act, the Company has a defined contribution employee retirement plan covering all domestic employees. The Company contributes monthly an amount based on 6% of the employees’ monthly salaries and wages to the employees’ personal pension accounts with the Bureau of Labor Insurance. The pension expenses under this plan amounted to $114,186 and $129,160 for the six-month periods ended June 30, 2009 and 2010, respectively. 3) The subsidiaries in mainland China have defined contribution pension plans and contribute an amount monthly based on 8%~9% of employees’ monthly salaries and wages to an independent fund administered by a government agency. 4) As of June 30, 2009 and 2010, the subsidiaries which participated in defined contribution pension plans recognized reserve according to the respective local laws for retirement plan in the amount of $226,842 and $227,272, respectively. Pension expenses in the amount of $1,690,494 and $2,319,732 were recognized for the six-month periods ended June June 30, 2009 and 2010, respectively. (18) Capital stock 1) As of June 30, 2010, the Company’s authorized shares were 9,300,000 thousand shares (including 200 million shares reserved for stock warrants or bonds issued with detachable warrants) and the issued and outstanding common stock were 8,578,932 thousand shares with a par value of $10 (in dollars) per share. 2) On June 8, 2010, the Company’s shareholders adopted a resolution to increase the authorized shares to 9,300,000 thousand shares and to issue stock dividends at par value amounting to $10,294,718. 3) On June 8, 2010, the Company’s shareholders approved employees’ stock bonus amounting to $5,449,328 for 2009. The employee stock bonus of 52,845 thousand shares was determined based on the closing price of $103.12 (in dollars) on June 7, 2010, the previous day of the 2010 shareholders’ meeting after taking into accounts the effects of ex-rights and ex-dividends. 4) Pursuant to the resolution adopted at the stockholders' meeting held on September 1, 1999,
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and after obtaining approval from the SFC, the Company issued 25 million units of global depository receipts (GDRs) in Europe, Asia and the USA, comprising 50 million shares of common stock (Deposited Shares). The issuance is amounted USD 347,250,000, the main terms and conditions of the GDRs are as follows: A. Voting Holders of GDRs have no right to directly exercise voting rights or attend the Company’s stockholders' meeting, except when a motion is on the election of directors or supervisors. A holder or holders together holding at least 51% of the GDRs outstanding at the relevant record date of the stockholders' meeting can instruct the Depositary to vote in the same direction in respect of one or more resolutions to be proposed at the meeting. B. Sale and withdrawal of GDRs Under the current R.O.C. law, shares represented by the GDRs may be withdrawn by holders of GDRs commencing three months after the initial issue of GDRs. A holder of a GDR may, provided that the Company has delivered to the custodian physical share certificates in respect of the Deposited Shares, request the Depositary to sell or cause to be sold on behalf of such holder the shares represented by such GDRs. C. Dividends GDR holders are entitled to receive dividends to the same extent as the holders of common stock subject to the terms of the Deposit Agreement and applicable laws of the R.O.C. D. As of June 30, 2010, 134,023,000 units of GDRs were outstanding, which represents 268,047 thousand shares of common stock. (19) Share-based payment - employee compensation plan As of June 30, 2009 and 2010, the share-based payment transactions of Foxconn International Holdings Ltd. (Cayman), a subsidiary of the Company (listed on the Stock Exchange of Hong Kong), are set forth below: Type of Quantity Contract Vesting conditions/ arrangement Grant date granted period Restricted terms Employee stock July 25, 2005 435,599,000 1 ~ 6 years Note (1) options 〞 September 12, 2007 2,400,000 1 ~ 6 years 〞 〞 September 12, 2007 300,000 1 ~ 3 years 〞 Share appreciation January 1, 2006 7,343,564 1 ~ 3 years - rights Other share-based December 29, 2006 5,748,145 - Note (2) payment plans 〞 July 24, 2007 502,090 - Note (3) 〞 December 28, 2007 20,459,322 - Note (4) 〞 October 29, 2009 26,161,489 - - 〞 April 27, 2010 9,435,264 - - Note: (1)Vested upon completion of certain years’ service. ～37～
(2)Of the shares granted, 2,737,718 shares cannot be sold within one to three years from the grant date. (3)Of the shares granted, 407,000 shares cannot be sold within one to two years from the grant date. (4)Of the shares granted, 20,362,078 shares cannot be sold within one to three years from the grant date.
1) Employee stock options For the stock options granted with the compensation cost accounted for using the fair value method, their fair value on the grant date is estimated using the Black-Scholes option-pricing model. The weighted-average parameters used in the estimation of the fair value are as follows: Stock Exercise Expected Expected Risk-free price price price dividend interest Fair value per Grant date (HK$) (HK$) volatility yield rate rate share (US$) July 25, 2005 $ 5.95 $ 6.06 30% - 3.39% $ 0.24 September 12, 19.46 20.63 36% - 3.92% 0.86 2007(A) For the six-month periods ended June 30, 2009 and 2010, the weighted-average exercise price of employee stock options outstanding were US$0.73 and US$1.23 (in dollars) per share, respectively, and expenses incurred on employee stock options transactions were $66,174 (US$1,973 thousand) and $81,760 (US$2,563 thousand), respectively. Details of the employee stock options are set forth below: For the six-month periods ended June 30, Employee Stock Options (In shares) 2009 2010 Options outstanding at beginning of period 308,100,192 264,831,013 Options granted - - Options exercised ( 16,000) ( 33,901,600) Options revoked ( 24,162,439) ( 2,034,880) Options outstanding at end of period 283,921,753 228,894,533 Options exercisable at end of period 103,945,423 116,379,653 2) Share appreciation rights For the six-month periods ended June 30, 2009 and 2010, the range of exercise price of stock appreciation rights outstanding were HK$3.96～HK$26.05 and HK$17.86～HK$25.65 (in dollars), respectively. As of June 30, 2009 and 2010, the liabilities on stock appreciation rights were $39,864 (US$1,215 thousand) and $5,851 (US$182 thousand), respectively (shown as “Accrued expenses”). For the six-month periods ended June 30, 2009 and 2010, expenses incurred on stock appreciation rights transactions were $8,855 (US$264 thousand) and $271 (US$9 thousand), respectively. ～38～
3) Other share-based payment plans These share-based payments were granted to employees. For the six-month periods ended June 30, 2009 and 2010, expenses incurred on other share-based payments were $102,901 (US$3,068 thousand) and $283,683 (US$8,893 thousand), respectively. (20) Capital reserve 1) Pursuant to the R.O.C. Company Law, for the capital reserve arising from donations and from paid-in capital in excess of par value on issuance of common stocks, an amount equal to up to 10% of the contributed capital can be capitalized, provided that there is no accumulated deficit, and the remainder is restricted to cover deficit. Further, accumulated deficit shall be first covered by retained earnings before capital reserve can be used to cover any accumulated deficit. 2) Under the R.O.C. SFB regulations, the Company may apply, once a year, to capitalize the capital reserves arising from paid-in capital in excess of par on the issuance of stocks for cash. The application shall be made after the year of the issuance, and the amount to be capitalized shall not exceed the prescribed amount. 3) According to rules of regulatory agency, capital reserve arising from long-term equity investments accounted for under the equity method can not be capitalized. 4) Please see Note 4 (15) for information on “Capital reserve from conversion right”. (21) Retained earnings 1) In accordance with the Company’s Articles of Incorporation, current year’s earning must be distributed in the following order: A. offsetting accumulated deficits, if any; B. Setting aside as legal reserve equal to 10% of current year’s net income after tax and distribution pursuant to clause (A); C. Setting aside a special reserve in accordance with applicable legal and regulatory requirement; D. 8% as bonuses to employees; qualified employees includes employees of affiliates per criteria set by Board of Director; and E. the remainder shall be distributed pursuant to the proposal of the board of directors in accordance with the Company’s dividend policy. The Company’s dividend policy requires the board of directors to consider the Company’s budget for future capital expenditures and funding needs when proposing the the distribution of earnings. The proposal should be resolved in the Meeting of the Stockholders. Dividends may be distributed in the form of cash or shares, or a combination of both, provided, however, that cash dividends distributed in respect of any fiscal year shall not exceed 90 percent of total dividends to stockholders.
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2) The details of the undistributed earnings were as follows: June 30, 2009 2010 Before new tax system was adopted $ 2,163,509 $ 2,163,509 After new tax system was adopted Subjected to additional 10% corporate income tax 120,623,446 150,965,282 Not subjected to additional 10% corporate income tax 58,719,305 75,402,429 $ 181,506,260 $ 228,531,220 3) The details of imputation system were as follows: June 30, 2009 2010 Balance of stockholders deductible tax account $ 21,141,842 $ 30,812,866 December 31, 2009 June 30, 2010 (Estimated) (Estimated) Tax deductible rate of earnings distribution 13.61% 17.14% 4) The appropriation of 2008 and 2009 earnings had been resolved at the stockholders’ meeting on April 16, 2009 and June 8, 2010, respectively. Details are summarized below: 2008 earnings 2009 earnings Dividends per Dividends per share share Amount (in dollars) Amount (in dollars) Legal reserve $ 5,513,318 $ - $ 7,568,511 $ - Stock dividends 11,121,935 1.5 10,294,718 1.2 Cash dividends 8,156,086 1.1 17,157,864 2.0 $24,791,339 $ 2.6 $ 35,021,093 $ 3.2 The earnings distribution information are posted on the “Market Observation Post System” at the website of the TSEC. 5) The estimated amounts of employees’ bonus and directors’ and supervisors’ remuneration for 2009 are $5,449,328 and $0, respectively, based on a certain percentage (8% and 0%) of net income in 2009, after taking into account the legal reserve and other factors, as prescribed by the Company’s Articles of Incorporation and are recognized as operating costs or operating expenses for 2009. The information of employees’ bonus and directors’ and supervisors’ remuneration is posted on the “Market Observation Post System” at the website of the TSEC. The employee stock bonus of 52,845 thousand shares were determined by the closing price of the Company’s common stock, $103.12 (in dollars), on June 7, 2010, the previous day of the 2010 shareholders’ meeting after taking into account the effects of ex-rights and ex-dividends. The employee stock bonus less than one share is paid in cash in the amount of $53 (in dollars).
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(22) Earnings per common share For the six-month period ended June 30, 2009 Number of Earnings per Amount shares (in common share Before tax After tax thousands) Before tax After tax Basic earnings per share: Consolidated net $33,632,669 $28,248,696 9,607,327 $ 3.50 $ 2.94 income Minority interest ( 66,834) 128,773 ( 0.01) 0.01 Net income attributable to equity holders of the Company $33,565,835 $28,377,469 $ 3.49 $ 2.95 Diluted earnings per share: Consolidated net $33,632,669 $28,248,696 $ 3.45 $ 2.90 income Minority interest ( 66,834) 128,773 ( 0.01) 0.01 Dilutive effect of stock equivalents: Convertible bonds 197,563 148,172 111,372 0.02 0.02 Employees’ bonus-2009 - - 23,149 - - Net income attributable to equity holders of the Company $33,763,398 $28,525,641 9,741,848 $ 3.46 $ 2.93
For the six-month period ended June 30, 2010 Number of Earnings per Amount shares (in common share Before tax After tax thousands) Before tax After tax Basic earnings per share: Consolidated net $42,501,092 $33,574,874 9,614,042 $ 4.42 $ 3.49 income Minority interest 1,037,501 1,163,543 0.11 0.12 Net income attributable to equity holders of the Company $43,538,593 $34,738,417 $ 4.53 $ 3.61 Diluted earnings per share: Consolidated net $42,501,092 $33,574,874 $ 4.38 $ 3.46 income Minority interest 1,037,501 1,163,543 0.10 0.12 Dilutive effect of stock equivalents: Convertible bonds - - 74,492 - - Employees’ bonus-2009 - - 24,572 - - Net income attributable to equity holders of the Company $43,538,593 $34,738,417 9,713,106 $ 4.48 $ 3.58 ～41～
1) Effective January 1, 2008, as employees’ bonus could be distributed in the form of stock, the diluted EPS computation shall assume that distribution will be in the form of stocks in the calculation of the weighted-average number of common shares outstanding during the reporting year, taking into account the dilutive effects of stock bonus on potential common shares; whereas, the basic EPS shall be calculated based on the weighted-average number of common shares outstanding during the reporting year, of which shall include the shares of employees’ stock bonus from the appropriation of prior year earnings, which have already been resolved at the stockholders’ meeting held in the reporting year. 2) The number of shares had retroactively been adjusted by the stock dividends as of June 30, 2010. (23)Personnel, depreciation and amortization expenses For the six-month periods ended June 30, 2009 2010 Cost of sales Personnel expenses Salaries $ 21,968,148 $ 29,674,959 Labor and health insurances 980,183 1,144,523 Pension 1,139,147 1,486,989 Others 443,756 589,425 $ 24,531,234 $ 32,895,896 Depreciation $ 13,068,647 $ 12,333,306 Amortization $ 1,127,637 $ 1,227,745 Operating expenses Personnel expenses Salaries $ 17,983,864 $ 23,336,739 Labor and health insurances 954,480 1,149,183 Pension 700,328 991,698 Others 265,822 357,299 $ 19,904,494 $ 25,834,919 Depreciation $ 3,921,017 $ 4,723,695 Amortization $ 1,420,999 $ 908,247
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5. RELATED PARTY TRANSACTIONS 1) Names of related parties and their relationship with the Company Names of related parties Relationship with the Company Foxconn Technology Co., Ltd. and subsidiaries Investee company accounted for under the equity (FTCS) method Pan International Industrial Corporation and " subsidiaries (PIICS) Foxconn Advanced Technology, Ltd.-Cayman An indirectly-owned investee company accounted (FATS-Cayman) for under the equity method Foxsemicon Integrated Technology, Inc. and " subsidiaries (FITI) CyberTAN Technology, Inc. (CyberTAN) " Cheng Uei Precision Industry Co., Ltd. The chairman is a brother of the Company's (CUPC) chairman Chimei Innolux Corporation and subsidiaries Same major shareholder (Chimei Innolux) (Original name:InnoLux Display Co., Ltd.) All the transactions with subsidiaries disclosed below had been eliminated when preparing consolidated financial statements. Except for transactions with the above related parties, there were no other material transactions between related parties and the Company for the six-month periods ended June 30, 2009 and 2010. 2) Significant transactions and balances with related parties A. Sales For the six-month periods ended June 30, 2009 % 2010 % FTCS $ 35,772,417 4 $ 40,619,555 4 Chimei Innolux 4,465,914 1 3,629,297 - CyberTAN 5,180,450 1 2,470,690 - Others 1,031,559 - 1,044,483 - $ 46,450,340 6 $ 47,764,025 4 The sales prices and credit terms to related parties were not significantly different from sales to third parties. For other particular related party transactions, prices and terms were determined in accordance with mutual agreements. The credit term is disclosed in Note 11 (G). The Group sold materials to the above related parties for processing and repurchased finished goods from them, the sales amount of materials and repurchasing price of finished goods were offset against each other and shown in the net amount in the financial statements.
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B. Purchases For the six-month periods ended June 30, 2009 % 2010 % FTCS $ 9,117,151 1 $ 9,481,236 1 FATS-Cayman 4,046,783 1 8,661,128 1 Chimei Innolux 4,290,859 1 5,745,278 1 PIICS 2,958,861 - 2,966,144 - Others 845,874 - 2,265,329 - $ 21,259,528 3 $ 29,119,115 3 The purchase prices and payment terms to related parties were not significantly different from purchases from third parties. For other related party transactions, prices and terms were determined in accordance with mutual agreements. The payment terms to third parties are between 30 to 90 days. C. Accounts receivable - related parties June 30, 2009 % 2010 % FTCS $ 10,336,108 4 $ 10,857,768 3 Chimei Innolux 2,798,275 1 4,650,602 1 CyberTAN 1,867,844 1 1,582,830 1 Others 802,510 - 521,205 - 15,804,737 6 17,612,405 5 Less: Allowance for doubtful accounts ( 169,433) ( 120,532) $ 15,635,304 $ 17,491,873 D. Prepayment June 30, 2009 2010 FITI $ 116,610 $ 125,391 E. Other receivables The Group purchased materials on behalf of FTCS and Chimei Innolux, etc. As of June 30, 2009 and 2010, other receivables amounted to $726,025 and $1,070,136, respectively. F. Accounts payable - related parties June 30, 2009 % 2010 % FTCS $ 12,143,345 4 $ 11,350,725 3 FATS-Cayman 2,625,114 1 4,684,355 1 Chimei Innolux 1,197,992 1 2,505,329 1 PIICS 2,308,805 1 1,935,066 - Others 272,445 - 629,302 - $ 18,547,701 7 $ 21,104,777 5
～44～
As of June 30, 2009 and 2010, a portion of accounts payable to FTCS in the amount of $5,935,656 and $4,715,890, respectively, pertains to purchases of materials made by FICS on behalf of the Group. G. Property transactions For the six-month period ended June 30, 2009 Receivables / Sales / Gain (payables) Counterparty Transaction purchase price on disposal at June 30, 2009 FTCS, Chimei Sale of fixed $ 170,076 $ 261 $ 48,767 Innolux, assets FAT-Cayman and FITI FTCS, Chimei Acquisition of 44,918 - ( 44,131) Innolux, fixed assets CyberTAN and PIICS
For the six-month period ended June 30, 2010 Receivables / Sales / Gain (payables) Counterparty Transaction purchase price on disposal at June 30, 2010 FTCS, Chimei Sale of fixed $ 208,349 $ - $ 36,958 Innolux, assets FAT-Cayman and FITI FTCS, Chimei Acquisition of 40,259 - ( 11,907) Innolux, fixed assets CyberTAN and PIICS H. Guarantees In July 2008, the Company’s subsidiary, Foxconn (Far East) Ltd., entered into a syndicated credit facility agreement with Mizuho Corporate Bank Ltd. as the lead bank and obtained a credit line in the amount of US$1,035,000 thousand. The Company is the guarantor of the loan.
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6. PLEDGED ASSETS As of June 30, 2009 and 2010, the assets pledged as collateral were as follows: June 30, 2009 2010 Assets Nature Book value Book value Time deposits and cash Bond deposit as security for court $ 85,145 $23,481,870 (shown as other proceedings, security deposit for financial assets employment of foreign employees non-current) and custom's deposits. Account receivable Short-term loans - 546,013 Fixed asset Short-term loans -Land and buildings - 91,026 Other asset Short-term loans and custom’s deposits -Refundable deposit 111,746 - $ 196,891 $24,118,909
7. COMMITMENTS AND CONTINGENT LIABILITIES As of June 30, 2010, the Group's significant commitments and contingent liabilities were as follows: 1) The Company entered into several contracts for the acquisition of machinery and construction of research center with total value of approximately $17,912 million. As of June 30, 2010, the unpaid balance on these contracts amounted to $2,854 million. 2) As of June 30, 2010, the company’s subsidiaries’ future minimum lease payments for factories and employees' dormitory were approximately $684 million as follows: Year Amount 2010.7~2011.12 $ 202,005 2012 138,974 2013 136,859 2014 142,161 2015 and thereafter 110,958 $ 730,957 3) The Group entered into an agreement with Qualcomm Incorporated regarding mobile phone use right. Under the agreement, the Group shall pay royalties based on sales volume of the related products. 4) In December 2007, Mondis Technology Ltd. filed a lawsuit with the U.S. District Court for the Eastern District of Texas and reguested this court to issue an injunction against the Company, alleging infringement, among others, of its patent on panel display and claimed indemnities for its losses. The Company has appointed a legal counsel to attend to this case. On November 30, 2009, the Company also sued its suppliers - Lite-on, Tatung and TPV, seeking fulfillment of their liability for the case above. On January 15, 2010, Mondis added TV product into part of
～46～
the scope of the litigation. The ultimate outcome of the lawsuit and the damages that may incur cannot be reasonably estimated as the litigation is still under trial and investigation. 5) In November 2008, Spansion Inc. requested the U.S. International Trade Commission (the “ITC”) to conduct an investigation, alleging patent infringement that Samsung flashing IC was assembled into the Company’s products. Spansion Inc. requested the U.S. ITC to issue an injunction to ban the Company’s export of related products to the United States. Spansion Inc. has made an out-of-court settlement with Samsung on March 3, 2009. However, in March 1, 2009, Spansion Inc. filed for bankruptcy in the United States, and the bankruptcy court refused to approve their settlement. Therefore, the litigation is still under trial. 6) In March 2009, O2 Micro Int’l Ltd. filed a lawsuit against the Company and Ampower Holding Ltd., an investee company indirectly owned by the Company and accounted for under the equity method and claimed indemnities for its losses. O2 Micro Int’l Ltd. alleged that the Company and Ampower Holding Ltd. failed to comply with the out-of-court settlement relating to previous patent dispute litigation. Based on the opinion of the Company’s legal counsel, the ultimate outcome of the lawsuit and the damages that the Company may incur cannot be reasonably estimated as the litigation is still under trial and investigation under the authority of the United States 8. SIGNIFICANT CATASTROPHE On Febuary19, 2010, the Group’s plant in Mexico was set on fire due to riot. There were no damages to the production lines, warehouses and equipment of the plant and the business operated as normal. Customer delivery schedule was unaffected. 9. SUBSEQUENT EVENTS 1) The Company’s subsidiary, PCE Paragon Solutions Kft., has signed a share purchase agreement with Dell Global B.V. and Dell International Holding VIII B.V. in December 2009 and expected to pay the purchase price and transfer the legal title of the shares in the second half year of 2010. 2) In March 2010, the Company’s board of directors resolved for Foxconn Singapore Pte. Limited, a subsidiary of the Company, to acquire 90.1% shareholding of Sony Slovakia, SPOL. S.R.O, a subsidiary of Sony Corporation. 3) On August 18, 2010, an approval was obtained from SFB for the Company to issue its 2010 1st Unsecured Euro Convertible Zero Coupon Bonds in the amount up to USD $1 billion. 10. OTHERS 1) Financial statement presentation: Certain accounts in the June 30, 2009 consolidated financial statements were reclassified to conform to the June 30, 2010 consolidated financial statement presentation.
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2) Fair value of financial instruments June 30, 2009 Fair value Quotation Estimated using Non-derivative financial in an active a valuation instruments Book value market technique Note Assets: Financial assets with fair $404,995,312 $ - $404,995,312 A values equal to book values Open-end funds 15,000 15,000 - B Available-for-sale financial assets 14,830,303 14,830,303 - C Financial assets carried at cost - non-current 1,324,699 - - D Refundable deposits 700,208 - 651,963 E Liabilities: Financial liabilities with fair values equal to book values 385,680,422 - 385,680,422 A Long-term bonds payable 16,680,000 16,674,784 F Current bonds payable 17,855,921 - 17,487,940 F Derivative financial instruments Assets: Futures contracts 282,963 - 282,963 G Forward exchange contracts - open 71,275 - 71,275 G Forward exchange contracts 4,893 - 4,893 G - offset Liabilities: Forward exchange contracts - open 32,943 - 32,943 G Forward exchange contracts - offset 19,210 - 19,210 G Off-balance sheet financial
instruments 34,069,095 34,069,095 Guarantees (US$1,035,000 - (US$1,035,000 H thousand) thousand)
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June 30, 2010 Fair value Quotation Estimated using Non-derivative financial in an active a valuation instruments Book value market technique Note Assets: Financial assets with fair $664,521,345 $ - $664,521,345 A values equal to book values Open-end funds 15,000 15,000 - B Available-for-sale financial assets 13,798,592 13,798,592 - C Financial assets carried at cost - non-current 2,148,152 - - D Refundable deposits 1,082,385 - 1,053,929 E Liabilities: Financial liabilities with fair values equal to book values 694,251,789 - 694,251,789 A Long-term bonds payable 29,539,400 - 28,758,807 F Derivative financial instruments Assets: Futures contracts - - - G
Forward exchange contracts 95,270 - 95,270 G Liabilities: Forward exchange contracts 73,246 - 73,246 G Off-balance sheet financial
instruments 33,301,125 33,301,125 Guarantees (US$1,050,000 - (US$1,050,000 H thousand) thousand) The methods and assumptions used to estimate the fair values of the above financial instruments are summarized below: A. For short-term instruments, the fair values were determined based on their carrying values because of the short maturities of the instruments. This method was applied to cash and cash equivalents, notes and accounts receivable, other receivables, short-term loans, notes and accounts payable, accrued expenses, current portion of long-term liabilities, other payables and other current liabilities. B. For Open-ended funds, the fair values were determined based on the funds’ net assets at June 30, 2009 and 2010. C. Available-for-sale financial assets are regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker industry group, pricing
～49～
service or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s-length basis. If the market for a financial instrument is not active, an entity establishes fair value by using a valuation technique. The fair values of available-for-sale financial assets are based on the quotation in the active markets as of June 30, 2009 and 2010. D. As financial assets carried at cost are not quoted in an active market and their fair value cannot be measured reliably, they are measured at cost. E. The fair value of refundable deposits is based on the present value of expected future cash inflow, and the discount rate is based on the fixed rate of the one year time deposit given by the Post Office as of June 30, 2009 and 2010. F. The fair value of convertible bonds issued after December 31, 2005 is based on the present value of expected cash flow amount. The discount rate is the effective interest rate of convertible bonds in the current market, whose contractual terms are similar to those of convertible bonds issued by the Company. G. The fair values of derivative financial instruments which include unrealized gain or loss on unsettled contracts were determined based on the amounts to be received or paid assuming that the contracts were settled as of the reporting date. H. The fair value of guarantees was based on the contract amounts. 3) Credit risk of off-balance sheet financial instruments Please see Note 5. 2) H. 4) Financial risk control A. The Group employs a comprehensive risk management and control system to clearly identify, measure, and control the various kinds of financial risk it faces, including market risk, credit risk, liquidity risk, and cash flow risk. Except for market risk, which is controlled by outside factors, the remainder of the foregoing types of risk can be controlled internally or removed from business processes. Therefore, the goal in managing each of these risks is to reduce them to zero. As for market risk, the goal is to optimize its overall position through strict recommendation, execution and audit processes, and proper consideration of a) long-term trends in the external economic/financial environment, b) internal operating conditions, and c) the actual effects of market fluctuations. B. The risk management and control system of the Group is administered within a framework of stratified responsibility: (1) The board of directors formulates and approves the procedures; the senior officers designated by the board make regular and unscheduled assessments of management procedures, organizational structure, transaction flows, and whether there are any abnormal circumstances;
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(2) The legal department reviews and examines transaction agreements; (3) The financing department makes recommendations with regard to transactions and is responsible for carrying them out; (4) The accounting department manages the accounts; (5) The audit department undertakes audits. Under this framework, with its strict adherence to proper segregation of duties and adequate internal control procedures, the Group seeks to minimize the potential adverse effects on the Group’s financial performance. 5) Material financial risk information A. Market risk (1) Foreign exchange risk: The Group’s major purchase and sale transactions are conducted in USD. The fair value changes along with the foreign exchange rate fluctuations. However, the amounts and periods of the Group’s accounts receivable and accounts payable are roughly equivalent, so the market risk could mostly be offset. When temporary gap rises, the Group would enter into the forward contract to hedge the risk. Accordingly, the Group expects no material risk as a whole. (2) Equity price risk: The Group is exposed to equity securities price risk because of investments held by the Group and classified on the consolidated balance sheet either as available-for-sale or at fair value through profit or loss. However, the Group expects no significant securities price risk. (3) Futures market risk: The Group is exposed to price risk because of investments in futures market instruments, which have fair value in the active market. The Group sets limits to control the transaction volume and the stop-loss amount of derivatives to reduce its futures market risk. As a result, there is no significant future market risk. (4) Interest rate risk: The long-term bonds issued by the Group all have fixed interest rates, so there is no interest rate risk. (5) Stock price risk: i. The domestic convertible bonds issued by the Company are compound instruments, which include the conversion rights, call option, put option. Except that the fair value of the bonds would be changed due to changes in market interest rate, their fair value is mainly subject to the changes in the Company’s stock price. The Company could exercise the call option to mitigate the stock price risk adequately. ii. Furthermore, the call option has expired since November 10, 2009, three years after the issuing date, thus no related risk involved.
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B. Credit risk (1) Receivables: With respect to receivables of the Group, most of the debtors are well-known international companies with very good credit standing. Moreover, the adequacy of the allowance for doubtful accounts is assessed regularly, so there is no material credit risk. (2) Financial market: i. The long-term exchange rate and futures transactions entered into by the Group are done with financial institutions with very good credit standing. Consequently, the likelihood that the credit risk would occur is low. ii. Convertible bond payables of the Company were issued on the primary market, so that the Company is not exposed to credit risk that may arise from counterparties on the secondary market. (3) Asset transactions: The Group has investments in available-for-sale financial assets and financial assets that are measured at cost. Although the potential for credit risk does exist, there is an active market for available-for-sale financial assets, and for financial assets measured at cost, the Group performs impairment testing regularly. Moreover, the Group evaluated the counterparties’ credit standing when entered into the transaction. Although the potential for credit risk does exist, the group doesn’t expect material credit risk accordingly. C. Liquidity risk (1) Receivables: As for receivables of the Group, the main debtors are well-known international companies with very good credit standing. There are no receivables overdue or with maturities over one year. Therefore, there is no material liquidity risk. (2) Financial assets: i. For available-for-sale financial assets held by the Group, there is an active market that allows these investments to be readily converted into certain amount of cash approximate to their fair values. The liquidity risk exposure is low. ii. As for financial assets measured at cost, the liquidity risk is high as there is no active market. However, since the shareholding percentages are relatively low, they do not constitute major investments. Therefore, no material liquidity risk is expected. (3) Foreign exchange transactions: For forward foreign exchange transactions entered into by the Group, the targets of the transactions are all currencies traded on international foreign exchange markets with high trading volumes and a large number of traders bidding. Trading is active with high liquidity. Therefore, no material liquidity risk is expected.
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(4) Futures transactions: For futures transactions entered into by the Group, orders are placed on future exchanges in New York, Chicago or London. The numbers of available future targets and international market participants are adequate to facilitate easy entry and exit. Therefore, no material liquidity risk is expected. (5) Working capital: The Group has good operating and credit conditions and has sufficient working capital, so it expects no significant liquidity risk arising from insufficient capital to meet contract obligations. (6) Convertible bonds: i. Under the terms of the domestic convertible bonds issued by the Company on November 11, 2006, the bondholders have the right to require the Company to redeem any bonds at face value on November 10, 2009, three years after the issuing date. ii. A total amount of $5,960,600 convertible bonds had been redeemed. The Company expects no significant liquidity risk would arise as it has sufficient working capital to meet the funding requirements for bonds redemption even if all the outstanding bonds are redeemed. iii. The outstanding convertible bonds in the amount of $12,039,400 will be redeemed on the maturity date, November 10, 2011. D. Cash flow risk from movements in interest rates (1) Long-term liabilities: i. The Group does not have long-term financial assets and liabilities that are affected by interest rate changes. Therefore, there should be no material cash flow risk from movements in interest rates. ii. As to the domestic bond payables issued by the Company, there should be no material cash flow risk from movements in interest rates due to the zero interest rate on the bond. (2) Foreign exchange transactions: The forward foreign currency transactions entered into by the Group are for the purpose of hedging against short-term gaps of the net positions of foreign currency assets and liabilities. As such, the amounts of the transactions are immaterial and their duration is short. Moreover, because of the equivalent foreign currency cash outflows and inflows, the group expects no significant funding demand. Therefore, no material cash flow risk is expected from movements in interest rates. (3) Financial assets:
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As the investments of the Group are not interest-rate type products, there is no cash flow risk from movements in interest rates.
～54～ 11. ADDITIONAL DISCLOSURES REQUIRED BY THE SECURITIES AND FUTURE COMMISSION
(1)Related information of significant transactions (The portions of transaction information with related parties were based on the financial statements of the company for the same period which was not reviewed by independent accountants.) All the transactions with subsidiaries disclosed below had been eliminated when preparing consolidated financial statements. The disclosure information as follows is for reference only. 1) Financial activities to any company or person: None 2) Guarantee information: Parties being guaranteed The highest The outstanding The ratio of The limit of outstanding guarantee The amount of accumulated guarantee The ceiling of the Name of the company Relationship with guarantee guarantee amount at guarantee with amount to net assets outstanding guarantee providing guarantee Name the Company For such party amount 2010 6/30/2010 collateral placed of the Company to the respective party Hon Hai Precision Foxconn(Far East) A wholly owned subsidiary (Note) NTD$ 33,301,125 NTD$ 33,301,125 - 7.24% (Note) Industry Co., Ltd. Ltd.-Cayman (US$1,035,000,000) (US$1,035,000,000) Note1: The Company’s total guarantee to others should not be in excess of the Company’s net assets. Note2: The policy for endorsements and guarantees provided by the Company is as follows: limit on endorsements and guarantees provided for a single party is 50% of the Company’s net assets; ceiling amount of total of the Company’s endorsements and guarantees provided for all subsidiaries of which the Company directly and indirectly holds more than 50% of their voting shares or for all companies which directly or indirectly hold more than 50% voting shares respectively, is 100% of the Company’s net assets. Note3: The net assets referred above are based on the latest audited or reviewed financial statements. 3) Marketable securities held as of June 30, 2010 June 30, 2010 Relationship General ledger Number of shares Percentage Market value/ Type and name of marketable securities (Note 1) with the Company accounts (Note 2) (in thousands) Book value of ownership Net worth Common stock of Pan International Industrial Investee company (1) 102,065 $ 2,700,030 21 $ 2,942,859 Corporation accounted for under the equity method Common stock of Foxconn Technology Co., Ltd. " (1) 98,849 4,797,348 10 4,757,114 Common stock of Media Tek Inc. None (2) 2,130 963,825 - 963,825 Common stock of Chimei Innolux Corporation Same major (3) 129,148 4,313,530 2 4,313,530 (Original name: Innolux Display Co., Ltd.) shareholder Note 1: Marketable securities disclosed above include listed stocks and open-end funds only. Note 2: Code of general ledger accounts: (1) Long-term investments accounted for under the equity method (2) Available for sale financial assets-current (3) Available for sale financial assets-non current 4) Marketable securities acquired or sold during the six-month periods ended June 30,2010 in excess of $100,000 or over 20% of the company’s contributed capital: None. 5) Acquisition of real estate exceeding the amount of $100,000 or 20% of the Company’s contributed capital: None. 6) Disposal of real estate $100,000 or over 20% of the Company’s contributed capital: None.
～55～ 7) Related party purchases or sales transactions exceeding the amount of $100,000, or 20% of the Company’s contributed capital: Descriptions of and reasons for difference in transaction terms compared to Notes and accounts Transactions non-related party receivable/(payable) Percentage of Percentage of total total purchases, notes and accounts Relationship sales, or other Credit receivable/ payable Company Counterparty with the Company Purchases/sales Amount related accounts terms Unit price Terms Balance balance Note Hon Hai Precision Foxconn (Far East) Ltd. and Wholly-owned subsidiary and Sales $ 25,959,910 3 45-90 days Note 1 Note 1 $ 9,713,033 4 Industry Co., Ltd. subsidiaries its subsidiaries " Foxconn Singapore Pte. Ltd. Wholly-owned subsidiary " 3,643,308 1 90 days " " 1,491,341 1 " CyberTAN Technology, Inc. An indirectly-owned investee " 2,358,884 - 60 days " " 1,083,092 - company accounted for under the equity method " Foxconn Japan Co., Ltd. Wholly-indirectly-owned " 1,608,352 - 90 days " " 1,162,528 - subsidiary " Chimei Innolux Corporation Same major shareholder " 1,605,671 - 90 days " " 951,056 - (Original name: Innolux Display Co., Ltd.) " Ambit Microsystem Wholly-indirectly-owned " 1,301,185 - 60 days " " 1,524,233 1 (Shanghai) Co., Ltd. subsidiary " Ingrasys Technology Inc. " " 1,227,521 - 60 days " " 534,500 - " Foxconn CMMSG Industria " " 1,196,758 - 90 days " " 2,539,199 1 de Eletronticos LTD.A.-Brazil " Ennoconn Corporation " " 550,058 - 60 days " " 227,454 - " Foxconn Technology Pte., Wholly-indirectly-owned " 514,633 - 90 days " " 244,562 - Ltd. subsidiary of FTC " Cheng Uei Precision Industry The chairman is a brother of the " 278,799 - 30-90 days " " 86,719 - Co., Ltd. Company's chairman " Foxteq Australia Pty Ltd. Wholly-indirectly-owned " 272,733 - 60 days " " 149,866 - subsidiary " Pan International Industrial Investee company accounted " 160,364 - 90 days " " 103,438 - Corporation (PIIC) for under the equity method " Fukui Precision Component Wholly-indirectly-owned Purchases 127,652 - 90 days " " 89,024 - (Shenzhen) Co., Ltd. subsidiary of Foxconn Advanced Technology Ltd.
～56～ Descriptions of and reasons for difference in transaction terms compared to Notes and accounts Transactions non-related party receivable/(payable) Percentage of Percentage of total total purchases, notes and accounts Relationship sales, or other Credit receivable/ payable Company Counterparty with the Company Purchases/sales Amount related accounts terms Unit price Terms Balance balance Note Hon Hai Precision Best Leap Enterprises LimitedWholly-indirectly-owned Purchases $ 213,032,080 25 90 days Note 1 Note 1 ($ 67,875,991) ( 26) Industry Co., Ltd. subsidiary " Foxconn (Far East) Ltd. Wholly-owned subsidiary " 127,027,274 15 30-90days " " ( 37,566,954) ( 14) Note 2 and subsidiaries and its subsidiaries " Universal Field International Wholly-indirectly-owned " 103,862,795 12 90 days " " ( 26,454,462) ( 10) Limited subsidiary " Jumbo Rise Management " " 17,783,842 2 Invoice " " ( 3,798,728) ( 2) Limited Date " AMB Logistics Ltd. " " 11,910,037 2 60 days " " -- Note 3 " NSG Technology, Inc. " " 3,555,765 1 30 days " " -- Note 4 " Chimei Innolux Corporation Same major shareholder " 2,512,518 - 60 days " " ( 1,096,511) ( 1) (Original name: Innolux Display Co., Ltd.) " CyberTAN Technology, Inc. An indirectly-owned investee " 1,900,506 - 75 days " " ( 473,875) - company accounted for under the equity method " IRIS World Enterprise Wholly-indirectly-owned " 1,703,427 - 90 days " " ( 865,492) - Limited subsidiary of Foxconn Advanced Technology Ltd. " Innolux Corporation Wholly-indirectly-owned " 1,6818,821 - 45 days " " ( 845,487) - subsidiary of Chimei InnoLux " Foxconn Technology Pte. Ltd. Wholly-indirectly-owned " 1,071,857 - 90 days " " ( 426,248) - subsidiary of FTC " Foxconn Technology Co., Investee company accounted " 458,281 - 60 days " " ( 265,761) - Ltd. for under the equity method (FTC) " Best Vision Technology Pte. Wholly-indirectly-owned " 421,557 - 90 days " " ( 254,168) -
～57～ Descriptions of and reasons for difference in transaction terms compared to Notes and accounts Transactions non-related party receivable/(payable) Percentage of Percentage of total total purchases, notes and accounts Relationship sales, or other Credit receivable/ payable Company Counterparty with the Company Purchases/sales Amount related accounts terms Unit price Terms Balance balance Note subsidiary of PIIC Hon Hai Precision FTP Technology Inc. Wholly-indirectly-owned Purchases $ 264,013 - 60 days Note 1 Note 1 ($ 128,979) - Industry Co., Ltd. subsidiary of FTC " FTC Technology Inc.. Wholly-indirectly-owned " 202,388 - " " " ( 83,749) - subsidiary of FTC " Funing Precision Component Wholly-indirectly-owned " 186,864 - " " " ( 78,737) - Co., Ltd. subsidiary " New Ocean Precision Wholly-indirectly-owned " 134,364 - " " " ( 169,069) - Component (Ganzhou) Co., subsidiary of PIIC Ltd. " Heroic Legend Enterprises Wholly-indirectly-owned Processing and 13,412,385 28 Note 1 " " ( 7,573,565) ( 17) Ltd. subsidiary molding costs (shown as accrued expenses) " Foxconn (Far East) Ltd. and Wholly-owned subsidiary and " 12,352,479 25 " " " ( 12,826,791) ( 28) subsidiaries its subsidiaries (shown as accrued expenses) 920,017 2 (shown as prepayment) " Success Rise Enterprises Ltd. Wholly-indirectly-owned " 10,639,375 22 " " " ( 5,335,784) ( 12) subsidiary (shown as accrued expenses) " Franklin Management Ltd. " " 5,744,765 12 " " " ( 11,224,860 ( 25) ) (shown as accrued expenses) " Carston Ltd. " " 2,483,064 5 " " " ( 7,707,563) ( 17) (shown as accrued expenses) " Hon Hai / Foxconn Logistics Wholly-owned subsidiary Logistics 407,074 22 30 days " " ( 70,464 ) - Texas LLC. Expenses (shown as accrued expenses) ( 81,455 - " Hon Hai/Foxconn Logistics " " 279,728 15 " " " ) California LLC. (shown as accrued expenses) Note1: The prices and terms to related parties were not significantly different from transactions with third parties. For other particular related party transactions, prices and terms were determined in accordance with mutual agreements.
～58～ Note2: As of June 30, 2010, the Company’s prepayment was $163,582 Note3: As of June 30, 2010, the Company’s prepayment was $907,817 Note4: As of June 30, 2010, the Company’s prepayment was $571,627
8) Receivables from related parties exceeding the amount of $100,000 or 20% of the Company’s contributed capital as of June 30, 2010: Overdue receivables Relationship with Balance of receivables Turnover Subsequent Allowance for Company Counterparty the Company from related parties rate Amount Actions taken collection bad debt Hon Hai Precision Foxconn (Far East) Ltd. and subsidiaries Wholly-owned subsidiary and its subsidiaries $ 9,713,033 7.61 $ - - $ 3,350,318 $ - Industry Co., Ltd. " Futaihua Industrial (Shenzhen) Limited Wholly-indirectly-owned subsidiary 54,327,354 - 240 Subsequent Collection 23,264,629 - (Shown as other receivables) (Note) " " Universal Field International Limited " 46,691,584 - 120 " 19,625,885 - (Shown as other receivables) (Note) " Foxconn (Far East) Ltd. and subsidiaries Wholly-owned subsidiary and its subsidiaries 36,562,808 - 2,823 " 4,159,695 - (Shown as other receivables) (Note) " Foxconn CMMSG Industria De Electronicos Wholly-indirectly-owned subsidiary 2,539,199 1.87 992,133 " 2,429 23,980 Ltda.-Brazil " Ambit Microsystem (Shanghai) Co., Ltd. " 1,524,233 5.37 35,136 " - 6,568 " Foxconn Singapore Pte. Ltd. Wholly-owned subsidiary 1,491,341 5.24 100,513 " 499,959 7,756 " Foxconn Japan Co. Ltd. Wholly-indirectly-owned subsidiary 1,162,528 3.30 1,576 " 347,909 6,759 " CyberTAN Technology, Inc. An indirectly-owned investee company 1,083,092 4.40 24,432 " 537,912 5.518 accounted for under the equity method " Chimei Innolux Corporation Same major shareholder 951,056 3.58 19,060 " 318,386 1,879 (Original name: Innolux Display Co., Ltd.) " Ingrasys Technology Inc. Wholly-indirectly-owned subsidiary 534,500 5.00 - - 211,700 2,673 " Foxconn Technology Pte. Ltd. Wholly-indirectly-owned subsidiary of FTC 244,562 7.54 25,835 Subsequent Collection 36,670 280 " New Ocean Precision Component (Ganzhou) Wholly-indirectly-owned subsidiary of PIIC 236,059 2.34 52,823 " 52,861 1,365 Co., Ltd. " Ennconn Corporation Wholly-indirectly-owned subsidiary 227,454 6.43 - - 101,712 1,137 " Foxteq Australia Pty Ltd. " 149,866 2.21 - - 25,730 750 " Fuhong Precision Component " 132,029 4.75 - - 24,962 660 " Pan International Industrial Investee company accounted for under the 103,438 2.96 - - 46,535 517 Corporation (PIIC) equity method
Note: Receivables for payments made on behalf of others.
9) Information on derivative transactions: Please see Note 4(2).
～59～ (2)Disclosure information of investee company (The portions of transaction information with related parties were based on the financial statements of the company for the same period which was not reviewed by independent accountants.) All the transactions with subsidiaries disclosed below had been eliminated when preparing consolidated financial statements. The disclosure information as follows is for reference only. 1) Information on Investee Companies: Held by the Company at June 30, 2010 Original Investment Nero income investment amount Number of (loss) Income (loss) Main operating June 30, December 31, shares Percentage of of the investee recognized by (in Investor Investee company Address Activities 2010 2009 thousands) ownership (%) Book value company(Note1) the Company Note Hon Hai Precision Foxconn (Far East) Ltd. Cayman Investment holding $ $13,239,347 $ 1,315,522 100$ 332,664,182 $ 20,509,326 $ 20,899,524 Industry Co., Ltd. Islands 23,331,010 " Hyield Venture Capital Co., Ltd. Taipei " 3,900,000 3,900,000 390,000 98 14,126,949 245,422 239,058 " Bao Shin International Investment Taipei " 2,998,500 2,998,500 415,000 100 7,932,912 372,694 374,951 Co., Ltd. " Ambit International Ltd. British Virgin " 1,788,146 1,788,146 53,100 100 7,552,032 378,428 375,014 Islands " Foxconn Technology Co., Ltd. Taipei Manufacture and design of 481,782 481,782 98,849 10 4,797,348 2,761,353 234,576 Note 3 monitors " Hon Yuan International Investment Taipei Investment holding 1,611,500 1,611,500 193,900 100 3,105,678 110,417 110,513 Co., Ltd. " Pan International Industrial Taipei Manufacture and marketing 2,042,398 2,042,398 102,065 21 2,700,030 148,220 47,302 Note 2 Corporation of cables " Foxconn Holding Ltd. British Virgin Investment holding 1,454,284 1,134,653 46,297 100 3,161,824 ( 241,951) ( 239,202) Islands " Hon Chi International Investment Taipei " 1,500,500 1,500,500 192,200 100 2,702,560 132,851 129,519 Co., Ltd. " Lin Yih International Investment Taipei Investment holding 904,411 904,411 95,500 100 975,695 4,163 4,099 Co., Ltd. " Foxconn SA B.V. Netherland " 1,713,437 1,390,079 36,658 95 1,230,628 ( 36,591) ( 34,761)
" Premier Image Technology (H.K) Hong Kong Purchase and the sales of 22,311 22,311 1,409 2 150,877 547,744 1,386 Note 5 Ltd. cameras and related parts " Image & Vision Investment British Virgin Investment holding 108,250 108,250 3,251 100 127,736 ( 207) ( 207) Corporation Islands " Altus Technology Inc. Taipei Manufacture, design and 865,177 865,177 65 65 79,080 68 44 Note 4 marketing of cellular phone, camera lens and sensors " Syntrend Creative Park Co., Ltd. Taipei Manufacture and marketing 344,000 - 34,400 80 344,000 - - of computer componeents " Margini Holdings Limited British Virgin Investment holding 7,153,970 7,153,970 220,000 100 5,901,082 47,699 48,717 Islands " Others 191,791 166,694 - - 314,198 23,823 24,974 Total $ 50,411,467 $ 39,307,718 $ 387,866,811 $ 25,003,459 $ 22,215,507
～60～
Note 1: The investment income recognized for this period had eliminated unrealized gain or loss on the transactions between the Company and its investees. Note 2: The Company and the directly and indirectly investee companies own 26.67% of Pan International Industrial Corporation’s outstanding shares. Note 3: The Company and the direct and indirect investee companies own 30.34% of Foxconn Technology Co., Ltd.’s outstanding shares. Note 4: The Company and the direct and indirect investee companies own 100% of Altus Technology Inc.’s outstanding shares. Note 5: The Company and the direct and indirect investee companies own 99.96% of Premier Image Technology (H.K) Ltd.’s outstanding shares.
Held by the Company at June 30, 2010 Original Investment investment amount Number of Net Income (loss) Income (loss) Main operating June 30, December 31, shares Percentage of of the investee recognized by Investor Investee company Address Activities 2010 2009 (in thousands) ownership (%) Book value company the Company Note Hyield, Hon Yuan, Foxsemicon Integrated Technology Miaoli Manufacture of $ 448,110 $ 448,110 21,663 20 $ 117,701 $ 16,904 $ 5,482 Bao Shin and Hon Inc. semiconductor machinery Chi and sales of computer components Hyield, Hon Yuan, Foxconn Technology Co., Ltd. Taipei Manufacture and design of 1,992,567 1,992,567 196,101 20 9,734,957 2,761,353 457,693 Bao Shin and Hon monitors Chi Hon Yuan, Bao Shin Pan International Industrial Taipei Manufacture and marketing 551,939 551,939 27,646 6 762,318 148,220 12,920 and Hon Chi Corporation of cables Hyield, Hon Yuan, Altus Technology Inc. Taipei Manufacture, marketing and 284 284 35 35 43,364 69 24 Bao Shin, Lin Yih design of cellular phone, and Hon Chi camera lens and sensors Hyield AnTec Electronic System Co., Ltd. Taipei Manufacture of cable, 970,00 970,00 60,010 100 411,507 ( 11,314) ( 4,078) electronic equipment and 0 0 electron component of motor vehicles Hyield, Hon Yuan, CyberTAN Technology, Inc. Hsinchu Manufacture, design and 357,39 357,39 35,122 11 561,498 163,972 12,816 Bao Shin, Lin Yih marketing of wireless 6 6 and Hon Chi network equipment Bao Shin Ennconn Corporation Taipei Design and manufacture of 244,29 244,29 21,825 52 340,663 60,419 34,464 single board computer, 1 1 embedded board, industrial motherboard Bao Shin UVAT Technology Co., Ltd. Taoyuan Manufacture and sales of 180,000 180,000 7,558 19 194,931 35,407 7,487 vacuum sputtering system and vacuum coating
～61～ Held by the Company at June 30, 2010 Original Investment investment amount Number of Net Income (loss) Income (loss) Main operating June 30, December 31, shares Percentage of of the investee recognized by Investor Investee company Address Activities 2010 2009 (in thousands) ownership (%) Book value company the Company Note service Hyield and Bao Shin Simplo Technology Co., Ltd. Hsinchu Information service, $ 1,433,855 $ 1,433,855 19,966 9 $ 1,824,044 $ 1,593,752 $ 115,803 manufacture of lighting equipment, data storage and processing system, electronic components, battery, power generation/ transmission/ distribution machinery, and wireless communication system Hon Chi, Hon Yuan, Foxnum Technology Co., Ltd. Taipei Manufacture and sales of 460,65 460,65 46,065 90 480,576 175,710 158,497 and Bao Shin machinery, computer and 0 0 peripheral devices Hyield, Hon Yuan, G-TECH Optoelectronics Miaoli Manufacture of glass, glass 810,000 810,000 56,501 37 787,619 83,013 32,028 Bao Shin and Hon Corporation products and electronic Chi components Hyield and Bao Shin Advanced Microelectronic Hsinchu Research, development, 187,82 142,82 25,699 15 148,282 ( 86,067) ( 20,333) Products, Inc. design, manufacture and 0 0 sales of integrated circuit and semi-conductor components Foxconn Ways Technical Corp., Ltd. Taoyuan Manufacture of plastic 1,045,489 1,045,489 21,409 23 1,148,195 22,493 ( 12,266) International articles, surface treatment, Holdings Ltd. – and manufacture and Cayman processing of electronic components Hyield and Bao Shin Bionet Corporation Taipei Extraction, testing, storage 100,000 100,000 3,393 8 99,074 ( 28,106) ( 2,193) and research on umbilical cord blood stem cells, mesenchymal stem cells, and primary teeth Hyield Ingrasys Technology Inc. Taoyuan Design, research, 222,340 222,340 14,000 97 413,475 49,843 48,124 manufacture and sales of data storage and processor Hyield, Hon Yuan, Others 924,795 924,795 - - 971,796 191,719 9,873 Bao Shin and Hon Chi Note: Hyield Venture Capital Co., Ltd. is referred to as Hyield. Hon Chi International Investment Co., Ltd. is referred to as Hon Chi. Hon Yuan International Investment Co., Ltd. is referred to as Hon Yuan.
～62～ Bao Shin International Investment Co., Ltd. is referred to as Bao Shin. Lin Yih International Investment Co., Ltd. is referred to as Lin Yih.
～63～
2) Financial activities with any company or person
Maximum Nature of Total Allowance for Loan Total loan Balance Ending Interest Financial Transaction Reason for Doubtful Assert Pledge limit per limit of the Name of company Name of Counterparty Account During 2010 Balance Rate Activity Amount Financing Accounts Item Value counterparty company loan Hongfujin Precision Fujin Precision Industrial Entrusted Loans $ 1,726,753 $ - - Short term $ - Business $ - None $ - Note1 Note1 Industry (Shenzhen) (Jincheng) Co., Ltd. financing operation Co., Ltd. " Futaijie Science & " 140,007 94,770 1.98% " - " - " - " " Technology Development (Shenzhen) Co., Ltd. " Futaikang Precision " 51,336 47,385 1.98% " - " - " - " " Component (Shenzhen) Co., Ltd. " Fu Ding Precision Component " 473,850 473,850 1.98% " - " - " - " " (Shenzhen) Co., Ltd. Foxconn Precision Shenzhen Fuhongjie " 186,676 156,371 1.98% " - " - " - " " Component Technology Service Co. Ltd. (Shenzhen) Co., Ltd. Foxconn (Kunshan) Foxconn Electronic Industrial " 790,253 794,646 1.71% " - " - " - " " Computer Connector Development (Kunshan)Co., Co., Ltd. Ltd. " Kangzhun Electronic " 1,755,294 824,499 1.71% " - " - " - " " Technology (Kunshan) Co., Ltd. " Fuxiang Precision Industrial " 2,290,330 - - " - " - " - " " (Kunshan) Co., Ltd. Hongzhun Precision Foxconn Electronic Industrial " 961,916 961,916 1.71% " - " - " - " " Tooling (Kunshan) Development (Kunshan)Co., Co., Ltd. Ltd. " Kangzhun Electronic " 616,005 616,005 1.71% " - " - " - " " Technology (Kunshan) Co., Ltd. Ambit Microsystem Foxconn Electronic Industrial " 772,376 772,376 1.71% " - " - " - " " (Shanghai) Co., Ltd. Development (Kunshan)Co., Ltd. " Fuxiang Precision Industrial " 328,531 - - " - " - " - " " (Kunshan) Co., Ltd. Fulin Electronical Foxconn Electronic Industrial " 284,310 284,310 1.71% " - " - " - " " Technology Development (Kunshan)Co., (Changshu) Co., Ltd. Ltd. " Fuxiang Precision Industrial " 281,598 - - " - " - " - " " (Kunshan) Co., Ltd.
～64～
Maximum Nature of Total Allowance for Loan Total loan Balance Ending Interest Financial Transaction Reason for Doubtful Assert Pledge limit per limit of the Name of company Name of Counterparty Account During 2010 Balance Rate Activity Amount Financing Accounts Item Value counterparty company loan Fuzhun Precision Fuyu Electronical Technology Entrusted Loans $ 436,477 $ - - Short term $ - Business $ - None $ - Note1 Note1 Tooling (Huaian) Co., (Huaian)Co., Ltd. financing operation Ltd. Fuxing Precision Fuyu Electronical Technology " 93,866 - - " - " - " - " " Component (Huaian) (Huaian)Co., Ltd. Co., Ltd. Hongfutai Precision Foxconn Precision Electronics " 1,060,268 1,042,470 4.37% " - " - " - " " Electrons(Yantai) Co., (Yantai) Co., Ltd. Ltd. Fu Tai Kang Foxconn Precision Electronics " 900,315 900,315 4.37% " - " - " - " " Electronics (Yantai) Co., Ltd. Development (Yantai) Ltd. Foxconn (Far East) Ltd. Margini Holdings Ltd. Other 408,301 408,301 0.00% " - " - " - " " Receivables- financing " Fuxiang Precision Industrial " 3,217,500 3,217,500 0.34% " - " - " - " " (Kunshan) Co., Ltd. " Kangzhun Electronic " 1,930,500 1,930,500 0.34% " - " - " - " " Technology (Kunshan) Co., Ltd. Foxconn (Far East) Ltd. Foxconn (Kunshan) Computer " 968,468 968,468 0.34% " - " - " - " " Connector Co., Ltd. " Fujin Precision Industrial " 643,500 643,500 0.35% " - " - " - " " (Jincheng) Co., Ltd. " Hongfutai Precision " 5,989,376 5,989,376 0.35% " - " - " - " " Electrons(Yantai) Co., Ltd. Foxconn (Far East) Ltd.Fuyu Electronical Technology " 1,930,500 1,930,500 0.35% " - " - " - " " (Huaian)Co., Ltd. " Carston Ltd. Other Receivables 823,614 - - " - " - " - " " " Heroic Legend Enterprises " 1,054,696 343,951 0.00% " - " - " - " " Ltd. " Franklin Management Ltd. " 2,333,653 2,333,653 0.00% " - " - " - " " Shenzhen Fu Tai Hong Foxconn Precision Electronics Entrusted Loans 3,519,975 1,089,855 1.98% " - " - " - Note2 Note2 Precision Industry (Taiyuan) Co., Ltd. Co., Ltd. Foxconn Precision Futaijing Precision " 1,089,855 1,089,855 1.98% " - " - " - " " Component Electronics (Beijing) Co., (Beijing) Co., Ltd. Ltd. " Foxconn Precision Electronics " 6,382,888 5,638,815 1.98% " - " - " - " " (Langfang) Co., Ltd.
～65～
Maximum Nature of Total Allowance for Loan Total loan Balance Ending Interest Financial Transaction Reason for Doubtful Assert Pledge limit per limit of the Name of company Name of Counterparty Account During 2010 Balance Rate Activity Amount Financing Accounts Item Value counterparty company loan " Foxconn(Tianjin) Precision " 710,775 710,775 1.98% " - " - " - " " Industry Co., Ltd. Execustar International Foxconn Precision Electronics Other Receivables $ 546,975 $ 546,975 0.44% Short term $ - Business $ - None $ - Note2 Note2 Ltd. (Langfang) Co., Ltd. financing operation Foxconn International Foxconn Precision Electronics " 6,113,250 6,113,250 0.76% " - " - " - " " Holdings Ltd. (Taiyuan) Co., Ltd. " Futaijing Precision " 4,311,450 4,311,450 0.75% " - " - " - " " Electronics (Beijing) Co., Ltd. " Foxconn Precision Electronics " 5,759,325 5,759,325 1.58% " - " - " - " " (Langfang) Co., Ltd. Note 1: The policy for loans granted mutually between overseas subsidiaries of which the Company directly or indirectly holds 100% of their voting shares is as follows: ceiling on total loans granted by an overseas subsidiary to all overseas subsidiaries is 20% of the Company’s net assets; limit on loans granted by an overseas subsidiary to a single overseas subsidiary is 10% of the Company’s net assets. Note 2: The policy for loans granted by overseas subsidiaries of which FOXCONN INTERNATIONAL HOLDINGS LTD. directly or indirectly holds 100% of their voting shares is as follows: ceiling on total loans granted by an overseas subsidiary to all parties is 60% of the net assets of FOXCONN INTERNATIONAL HOLDINGS LTD.; limit on loans granted by an overseas subsidiary to a single party is 30% of the net assets value of FOXCONN INTERNATIONAL HOLDINGS LTD. 3) Guarantee information:
Parties being guaranteed Ratio of Highest Outstanding accumulated Ceiling of Limit of outstanding guarantee Amount of guarantee amount the outstanding Relationship with guarantee guarantee amount amount as of guarantee with to net assets guarantee to Name of guarantor Name of company the Company for such party in 2010 6/30/2010 collateral placed of the Company the respective party Hongfujin Precision Industry Futaihua Industrial (Shenzhen) Limited The company and its Note $ 6,113,250 $ 6,113,250 $ - 1.33% Note (Shenzhen) Co., Ltd. subsidiaries hold more than 50% of common shares of the investee company " Fuhuajie Industrial (Shenzhen) Limited The company and its " 1,308,241 1,308,241 - 0.28% Note subsidiaries hold more than 50% of common shares of the investee company Note1: Guarantees to overseas subsidiaries of which the Company directly and indirectly hold 100% of their voting shares should not exceed 50% of the Company’s net assets; the limit of guarantee for a single entity should not be in excess of 20% the Company’s net assets. Note2: The net assets referred above are based on the latest audited or reviewed financial statements.
～66～
4)Marketable securities held as of June 30, 2010: Relationship June 30, 2010 Type and name of of the issuers with General ledger Number of shares Ownership Market Value/ Name of investors marketable securities (Note 1) the investee company account (Note 2) (in thousands) Book value percentage Net worth Bon Shin International Investment Co., Ltd. Common stock of Pan International Industrial Corporation Investee company accounted for (1) 3,462 $ 1 $ under the equity method 101,799 84,551 " Common stock of Foxconn Technology Co., Ltd. " (1) 89,267 4,402,793 9 4,295,976 " Common stock of CyberTAN Technology Inc. Indirect investee company (1) 2,182 34,873 1 34,873 accounted for under the equity method " Common stock of SimploTechnology Co., Ltd. " (1) 9,680 884,292 4 502,925 " Common stock of Advanced Microelectronic Products, Inc. " (1) 11,017 47,359 6 75,729 " Common stock of Bionet Corporation " (1) 1,696 49,537 4 32,575 " Common stock of AcBel Polytech Inc. None (2) 1,000 21,400 - 21,400 " Common stock of Entire Technology Co., Ltd. " (2) 1,676 309,973 2 309,973 Hon Chi International Investment Co., Ltd. Common stock of Pan International Industrial Corporation Investee company accounted for (1) 7,193 196,506 1 175,681 under the equity method " Common stock of Foxconn Technology Co., Ltd. " (1) 22,546 1,151,323 2 1,085,054 " Common stock of CyberTAN Technology Inc. Indirect investee company (1) 2,835 45,317 1 45,317 accounted for under the equity method " Common stock of Tul Corporation None (2) 2,044 98,725 3 98,725 Hon Yuan International Investment Co., Ltd. Common stock of Pan International Industrial Corporation Investee company accounted for (1) 16,991 464,013 4 414,988 under the equity method " Common stock of Foxconn Technology Co., Ltd. " (1) 24,152 1,228,580 3 1,162,311
Hon Yuan International Investment Co., Ltd. Common stock of CyberTAN Technology Inc. Indirect investee company (1) 10,035 160,436 3 160,436 accounted for under the equity method " Common stock of Unimicron Corporation None (2) 2,800 132,720 - 132,720 " Common stock of Entire Technology Co., Ltd. " (2) 2,070 419,376 3 419,376 Lin Yih International Investment Co., Ltd. Common stock of AcBel Polytech Inc. None (2) 6,714 143,680 1 143,680 " Common stock of CyberTAN Technology Inc. Indirect investee company (1) 10,035 160,436 3 160,436 accounted for under the equity method Foxconn Holding Ltd. S.A.S Dragon Holdings Ltd. None (2) 46,000 333,574 19 333,574 " Alliance Fiber Optic Products, Inc. Indirect investee company (1) 8,000 332,992 20 332,992
～67～ Relationship June 30, 2010 Type and name of of the issuers with General ledger Number of shares Ownership Market Value/ Name of investors marketable securities (Note 1) the investee company account (Note 2) (in thousands) Book value percentage Net worth accounted for under the equity method Foxconn (Far East) Ltd.- Cayman Foxconn International Holdings Ltd. -Cayman Subsidiary owned by Foxconn (1) 5,081,035 79,369,144 71 79,369,114 (FarEast) Ltd. -Cayman Foxconn (Far East) Ltd.- Cayman Alibaba.com Limited None (2) 17,549 $ 1,137,301 - $ 1,137,301 Hyield Venture Capital Co., Ltd. Common stock of Cheng Uei Precision Industry Co., Ltd. The chairman is a brother of the (2) 2,044 106,288 - 106,288 Company's chairman " Common stock of TXC Corporation None (2) 560 28,056 - 28,056 " Common stock of Unimicron Corporation " (2) 4,000 189,600 - 189,600 " Common stock of Chipbond Technology Corporation " (2) 3,003 144,144 1 144,144 " Common stock of Foxlink Image Technology Co., Ltd. " (2) 3,400 63,580 2 63,580 " Chimei Innolux Corporation Same major shareholder (2) 153,888 5,139,875 2 5,139,875 (Original name: Innolux Display Co., Ltd.) " Common stock of Foxconn Technology Co., Ltd. Investee company accounted for (1) 60,136 2,952,261 6 2,894,044 under the equity method " Common stock of CyberTAN Technology Inc. Indirect investee company (1) 10,035 160,436 3 160,436 accounted for under the equity method " Common stock of Simplo Technology Co., Ltd. " (1) 10,286 939,752 5 534,427 " Common stock of Advanced Microelectronic Products, Inc. " (1) 14,682 100,923 9 100,923 " Common stock of Bionet Corporation " (1) 1,697 49,537 4 32,575 Foxconn International Holdings Ltd. Common stock of Ways Technical Corp., Ltd. " (1) 21,409 1,148,195 23 1,148,195 -Cayman " Diabell Co., Ltd. " (1) 75 313,193 20 313,193 Note1: Marketable securities disclosed above included listed stocks and open-end funds only. Note2: Code of general ledger accounts: (1)Long-term investment accounted for under the equity method (2)Available for sale financial assets-non–current 5) Marketable securities acquired or sold during the six-month periods ended June 30, 2010 in excess of $100,000 or 20% of total contributed capital:None 6) Acquisition of real estate exceeding the amount of $100,000 or 20% of total contributed capital: None. 7) Disposal of real estate exceeding the amount of $100,000 or 20% of total contributed capital: None.
8) Related party purchases or sales transactions in excess of $100,000 or 20% of total contributed capital: please see information on significant transactions in Note 11(1) and the following disclosures. Difference with general Notes and accounts Transactions transactions receivable (payable) Relationship with Percentage of Percentage Company Counterparty the Company Purchases /sales Amount purchases / sales Terms Unit price Terms Balance of balance Note
～68～ Difference with general Notes and accounts Transactions transactions receivable (payable) Relationship with Percentage of Percentage Company Counterparty the Company Purchases /sales Amount purchases / sales Terms Unit price Terms Balance of balance Note Ambit Microsystems (Zhong shan) Unique Logistics Ltd. An affiliate Sales $ 1,763,865 100 45 days Note Note $ 338,912 99 Corporation Unique Logistics Ltd. Ambit Microsystems (Zhong shan) " " 917,439 30 60 days " " 218,215 26 Corporation Ambit Microsystem (Shanghai) Co., Amworld Microsystems (Shanghai) Ltd. An affiliate Sales $ 539,926 2 60 days Note Note $ 302,910 3 Ltd. " AMB Logistics Ltd. " " 16,454,351 68 " " " 1,789,038 20 " Foxway Precision Industry (Hangzhou) Co., " " 233,456 1 90 days " " 173,930 2 Ltd. " Hongfutai Precision Electrons(Yantai) Co., " " 359,979 1 " " " 148,666 2 Ltd. " Hongfujin Precision Industry (Yantai) Co., " " 153,480 1 " " " 130,258 1 Ltd. " IRIS World Enterprises Ltd. " Purchases 205,447 - 90 days " " ( 15,122) ( 1) FIH (Hong Kong) Limited Sutech Industry Inc. " Sales 9,388,626 33 75 days " " 4,061,718 35 " Foxconn Reynosa S.A. De.C.V. " " 933,638 3 " " " 757,784 7 FIH (Hong Kong) Limited Foxconn Do Brasil Ind. E Comercio De " " 526,327 2 30 days " " 168,796 1 Electronicos Ltda. " Chi Mei Communication Systems Inc. " " 935,080 3 90 days " " 446,133 4 " FIH Europe Limited (Hungary) " " 1,014,128 4 30 days " " 397,011 3 " Foxconn India PVT. Ltd. " " 171,536 1 45 days " " 147,611 1 " Foxconn Precision Electronics (Langfang) " " 931,635 3 " " " 950,410 8 Co., Ltd. " Foxconn Precision Electronics (Yantai) Co., " Purchases 1,929,133 7 60 days " " ( 298,399) ( 3) Ltd. Honxun Electrical Industry Hongfujin Precision Industry (Yantai) Co., " " 505,494 74 60 days " " ( 457,335) ( 12) (Hangzhou) Co., Ltd. Ltd. " IRIS World Enterprises Ltd. " " 124,798 18 90 days " " ( 59,698) ( 2) Shenzhen Fu Tai Hong Precision FIH (Hong Kong) Limited " Sales 21,238,603 58 60 days " " 1,711,802 14 Industry Co., Ltd. " Futaijing Precision Electronics (Beijing) Co., " " 145,968 - 45 days " " 558,218 5 Ltd. " Foxconn Precision Electronics (Langfang) " " 1,325,577 4 " " " 1,575,624 13
～69～ Difference with general Notes and accounts Transactions transactions receivable (payable) Relationship with Percentage of Percentage Company Counterparty the Company Purchases /sales Amount purchases / sales Terms Unit price Terms Balance of balance Note Co., Ltd. " Hongfujin Precision Industry (Shenzhen) Co., " " 410,346 1 " " " 266,202 2 Ltd. " Fuhuajie Industrial (Shenzhen) Limited " " 125,038 - 30 days " " 87,868 1 Shenzhen Fu Tai Hong Precision Hon Fujin Precision Industry (Taiyuan) Co., An affiliate Purchases $ 167,813 1 60 days Note Note ($ 121,877) ( 1) Industry Co., Ltd. Ltd. " Fuzhun Precision (Shenzhen) Industry Co., " " 251,377 1 90 days " " ( 287,010) ( 2) Ltd. " IRIS World Enterprises Ltd. " " 119,541 - 60 days " " ( 104,369) ( 1) Foxconn Precision Component Futaijing Precision Electronics (Beijing) Co., " Sales 2,416,777 43 45 days " " 1,820,958 68 (Beijing) Co., Ltd. Ltd. " Shenzhen Fu Tai Hong Precision Industry " " 146,810 3 " " " 46,567 2 Co., Ltd. " FIH (Hong Kong) Limited " " 930,507 17 30 days " " 114,512 4 Foxconn(Tianjin) Precision Industry FIH (Hong Kong) Limited " " 387,245 45 60 days " " 10,730 4 Co., Ltd. Foxconn Precision Electronics Foxconn Precision Electronics (Langfang) " " 320,962 16 45 days " " 314,731 24 (Taiyuan) Co., Ltd. Co., Ltd. " FIH (Hong Kong) Limited " " 1,016,489 50 75 days " " 245,431 19 " Foxconn Precision Component (Beijing) Co., " " 132,612 7 45 days " " 88,821 7 Ltd. " Shenzhen Fu Tai Hong Precision Industry " " 150,440 7 60 days " " 137,027 11 Co., Ltd. Futaijing Precision Electronics FIH (Hong Kong) Limited " " 248,234 1 30 days " " 78,842 1 (Beijing) Co., Ltd. " Chi Mei Communication System ,Inc. " " 207,393 1 60 days " " 170,470 2 Futaijing Precision Electronics Foxconn Precision Electronics (Langfang) " Sales 212,607 1 45 days " " 159,907 2 (Beijing) Co., Ltd. Co., Ltd. " Chimei Innolux Corporation " Purchases 352,417 10 60 days " " ( 184,860) ( 2) (Original name: Innolux Display Co., Ltd.) Foxconn Precision Electronics Eliteday Enterprises Limited " Sales 8,321,445 51 " " " 1,632,920 32 (Langfang) Co., Ltd. " Shenzhen Fu Tai Hong Precision Industry " " 1,637,112 10 30 days " " 671,732 13 Co., Ltd.
～70～ Difference with general Notes and accounts Transactions transactions receivable (payable) Relationship with Percentage of Percentage Company Counterparty the Company Purchases /sales Amount purchases / sales Terms Unit price Terms Balance of balance Note " Foxconn Precision Component (Beijing) Co., " " 319,638 2 45 days " " 255,068 5 Ltd. " Futaijing Precision Electronics (Beijing) Co., " " 235,138 1 " " " 185,762 4 Ltd. Foxconn Precision Electronics Fujin Precision Industrial (Jincheng) Co., Ltd. An affiliate Purchases $ 459,215 10 45 days Note Note ($ 163,601) ( 1) (Langfang) Co., Ltd. " Hongfujin Precision Industry (Shenzhen) Co., " " 227,892 5 60 days " " ( 173,210) ( 1) Ltd. " Hon Fujin Precision Industry (Taiyuan) Co., " " 155,959 4 " " " ( 102,880) ( 1) Ltd. " IRIS World Enterprises Ltd. " " 305,568 7 " " " ( 208,510) ( 2) " Fuzhun Precision (Shenzhen) Industry Co., " " 197,372 4 30 days " " ( 180,417) ( 2) Ltd. Eliteday Enterprises Limited FIH Europe Limited (Hungary) " Sales 933,421 11 60 days " " 413,372 7 " Foxconn Reynosa S.A. De.C.V. " " 223,862 3 " " " 199,705 3 " Foxconn Do Brasil Ind. E Comercio De " " 212,608 3 " " " 118,424 2 Eletronicos Ltda. Fujin Precision Industry (Shenzhen) Honfujin Precision Electronics (Shenzhen) " Subcontract 265,268 95 90 days " " 106,082 99 Co., Ltd. Co., Ltd. Revenue Honfujin Precision Electronics Fu Ding Precision Component (Shenzhen) An affiliate Sales 714,582 2 " " " 426,653 2 (Shenzhen) Co., Ltd. Co., Ltd. " ShenZhen Fu Tai Hong Precision Industry " " 688,515 1 " " " 556,188 3 Co., Ltd. " Carston Ltd. " Subcontract 2,869,153 6 " " " 193,247 1 Revenue " Heroic Legend Enterprises Ltd. " " 11,881,147 25 " " " 212,892 1 " Franklin Management Ltd. " " 3,056,367 6 " " " 249,473 1 " Fujin Precision Industrial (Jincheng) Co., Ltd. " Sales 110,737 - " " " 95,774 1 " Hongzhun Precision Tooling (Kunshan) Co., " " 125,923 - " " " 114,455 1 Ltd. " Futaihua Industrial (Shenzhen) Limited " " 3,264,060 7 " " " 2,416,203 11 " Fuhuajie Industrial (Shenzhen) Limited " " 111,307 - " " " 93,418 - " Premier Image Technology (China) Ltd. " " 116,029 - " " " 75,017 1
～71～ Difference with general Notes and accounts Transactions transactions receivable (payable) Relationship with Percentage of Percentage Company Counterparty the Company Purchases /sales Amount purchases / sales Terms Unit price Terms Balance of balance Note " Hon Fujin Precision Industry (Taiyuan) Co., " Purchases 392,269 - " " " ( 107,007) ( 1) Ltd. " Fuhuigang Industrial (Shenzhen) Co., Ltd. " Processimg and 277,509 7 " " " ( 57,036) - molding cost Honfujin Precision Electronics Innocom Technology (Shenzhen) Co., Ltd. An affiliate Sales $ 1,087,084 2 90 days Note Note $ 689,203 3 (Shenzhen) Co., Ltd. " Foxnum Technology Co., Ltd. " Purchases 184,582 - " " " ( 28,623) - Fu Ding Precision Component Beyond Maximum Industrial Limited " Subcontract 3,195,121 96 " " " 659,177 89 (Shenzhen) Co., Ltd. Revenue Fuhong Precision Component Best Matrix Enterprises Ltd. " " 783,986 96 30 days " " 185,315 89 (Shenzhen) Co., Ltd. Champ Tech Optical (Foshan) Premier Image Technology (China) Ltd. " Sales 316,844 96 90 days " " 107,128 93 Corporation Fuhonyang Precision Industrial Best Ever Industries Limited " " 632,592 48 30 days " " 84,623 35 (Shenzhen) Co., Ltd. " Futaihua Industrial (Shenzhen) Limited " " 254,766 19 60 days " " 68,817 29 Kangzhun Electronic Technology Ambit Microsystem (Shanghai) Co., Ltd. " " 125,432 1 30 days " " 48,151 - (Kunshan) Co., Ltd. " Foxconn Technology Pte. Ltd. " Purchases 688,007 4 90 days " " ( 869,300) ( 5) " IRIS World Enterprises Ltd. " " 123,516 1 90 days " " ( 125,309) ( 1) Fuxiang Precision Industrial Smart Top International Ltd. " Sales 696,865 6 " " " - - (Kunshan) Co., Ltd. Foxconn Kunshan Computer Fuzhun Precision (Shenzhen) Industry Co., " Purchases 107,631 2 60 days " " ( 32,668) ( 1) Connector Co., Ltd. Ltd. Foxconn Electronic Industrial Foxconn (Kunshan) Computer Connector " Subcontract 4,190,714 99 30 days " " 1,808,128 97 Development (Kunshan) Co., Ltd. Co., Ltd. Revenue Best Leap Enterprises Limited Fusing International Inc. Pte. Ltd. " Sales 3,366,165 2 " " " 2,463,096 4 " Futaihua Industrial (Shenzhen) Limited " " 416,772 - " " " 287,547 - " Foxconn Technology Pte. Ltd. " " 1,269,006 1 " " " 1,111,839 2 Skilltop Limited Foxconn Image& Printing Product Pte. Ltd. " " 1,418,927 100 " " " 1,220,937 95 Hongfutai Precision Yantaishi Fulitong International Trading Co., " " 1,068,431 1 120 days " " 1,100,632 4 Electrons(Yantai) Co., Ltd. Ltd. " Dragon Spirit Ind. Ltd. " " 18,451,550 20 30 days " " 4,468,664 15
～72～ Difference with general Notes and accounts Transactions transactions receivable (payable) Relationship with Percentage of Percentage Company Counterparty the Company Purchases /sales Amount purchases / sales Terms Unit price Terms Balance of balance Note " Hongfujin Precision Industry (Yantai) Co., " 889,211 1 30 days " " 778,501 3 Ltd. " Universal Field International Limited " " 67,372,160 71 30 days " " 22,162,320 73 " Foxconn Technology Pte. Ltd. " Purchases 573,383 1 90 days " " ( 280,833) ( 1) Hongfutai Precision Yantai Fu Zhun Precision Industry Co,. Ltd. An affiliate Purchases $ 105,491 - 30 days Note Note ($ 49,614) - Electrons(Yantai) Co., Ltd. " Foxconn Technology Co., Ltd. " " 191,514 - 90 days " " ( 145,068) - " Pan-Interation Industrial Co. " " 125,621 - " " " ( 77,425) - " IRIS World Enterprises Ltd. " " 1,134,962 1 90 days " " ( 599,721) ( 1) Futaijie Science & Technology Hongfujin Precision Industry (Shenzhen) Co., " Sales 123,584 100 " " " 10,778 44 Development (Shenzhen) Co., Ltd. Ltd. Glorious Falcon International Ltd. Hongfutai Precision Electrons(Yantai) Co., " " 614,430 23 30 days " " 52,295 15 Ltd. " Chimei Innolux Corporation " " 226,163 8 90 days " " - - (Original name: Innolux Display Co., Ltd.) Foxconn CZ S.R.O-Czech Foxconn Rus, LLC " " 432,799 1 45 days " " 185,475 2 " Chimei Innolux Corporation " Purchases 319,186 2 " " " ( 56,999) ( 1) (Original name: Innolux Display Co., Ltd.) " CyberTAN Technology Inc. " " 287,680 2 " " " ( 2,721) - Foxconn Global Services Division Foxconn CZ S.R.O. -Czech " Sales 228,911 14 " " " 78,714 18 S.R.O.-Czech Fujin Precision Industrial (Jincheng) Hongfujin Precision Industry (Shenzhen) Co., " " 349,718 7 90 days " " 223,011 15 Co., Ltd. Ltd. " Futaihua Industrial (Shenzhen) Limited " " 421,387 9 " " " 500,278 34 " Best Ever Industries Limited " " 2,217,975 47 30 days " " 186,702 13 " Foxnum Technology Co., Ltd. " Purchases 325,461 - " " " ( 202,678) - Hongzhun Precision Tooling Hongfujin Precision Industry (Shenzhen) Co., " Sales 378,900 13 90days " " 414,555 15 (Kunshan) Co., Ltd. Ltd. " Kangzhun Electronic Technology (Kunshan) " " 692,955 23 " " " 445,794 16 Co., Ltd. " Foxconn (Kunshan) Computer Connector " " 107,614 4 " " " 64,638 2 Co., Ltd. " Foxconn (Kunshan) Computer Connector " " 435,202 15 " " " 595,243 21
～73～ Difference with general Notes and accounts Transactions transactions receivable (payable) Relationship with Percentage of Percentage Company Counterparty the Company Purchases /sales Amount purchases / sales Terms Unit price Terms Balance of balance Note Co., Ltd. " Foxconn Electronic Industrial Development " " 826,005 28 " " " 911,339 32 (Kunshan) Co., Ltd. Foxconn Electronics Inc. Beyond Maximan Industrial Ltd. " " 280,142 92 " " " 158,816 82 Shenzhen Fuhongjie Technology FIH (Hong Kong) Limited An affiliate Sales $ 168,524 34 30 days Note Note $ 53,501 46 Service Co., Ltd. " Carston Ltd. " Subcontract 326,248 66 " " " 62,337 54 Revenue Fuzhun Precision Tooling (Huaian) Foxconn Electronic Industrial Development " Sales 172,902 31 " " " 158,678 27 Co., Ltd. (Kunshan) Co., Ltd. " Fuyu Electronical Technology (Huaian) Co., " " 315,219 56 " " " 202,806 35 Ltd. Fuyu Electronical Technology Success Rise Enterprises Ltd. " Subcontract 3,581,824 100 " " " - - (Huaian) Co., Ltd. Revenue Hongfujin Precision Industry Top Step Enterprises Limited " Sales 30,991,550 84 90days " " 9,407,386 85 (Wuhan) Co., Ltd. " FTP Technology Inc. " Purchases 345,271 1 60days " " ( 206,540) ( 1) " Nanning Funing Precision Electronics Co., " " 121,351 - 30days " " ( 86,471) - Ltd. " Best Vision Technology Pte. Ltd. " " 451,658 1 " " " ( 381,997) ( 2) Hongfujin Precision Industry Ambit Microsystem (Shanghai) Co., Ltd. " Sales 211,956 - 90days " " 80,883 1 (Yantai ) Co., Ltd. Competition Team Technology Pte.Ltd. " " 1,567,306 2 30days " " 297,089 2 Hongfutai Precision Electrons(Yantai) Co., " " 582,724 1 90days " " 471,852 4 Ltd. " Full Profit International Limited " " 830,287 1 30days " " 545,237 4 " Universal Field International Limited " Sales 37,854,097 48 30 days " " 4,220,843 31 " Foxconn Technology Co., Ltd. " " 38,036,571 48 " " " 8,111,247 - " Foxconn Technology Pte. Ltd. " Purchases 149,836 - " " " ( 8,434) - " Yantai Fu Zhun Precision Industry Co., Ltd. " " 153,124 - " " " ( 8,370) - " Foxconn Technology Co., Ltd. " " 28,687,562 32 90days " " ( 4,650,573) 13 " Pan-Interation Industrial Co. " " 698,974 1 " " " ( 448,913) ( 1) " IRIS World Enterprises Ltd. " " 1,455,522 2 " " " ( 636,501) ( 2)
～74～ Difference with general Notes and accounts Transactions transactions receivable (payable) Relationship with Percentage of Percentage Company Counterparty the Company Purchases /sales Amount purchases / sales Terms Unit price Terms Balance of balance Note Universal Field International Hongfutai Precision Electrons(Yantai) Co., " Sales 1,322,001 1 " " " 649,522 - Limited Ltd. " Hongfujin Precision Electrons(Yantai) Co., " " 358,495 - 30days " " 89,858 - Ltd. Top Step Enterprises Limited Hongfujin Precision Industry (Wuhan) Co., An affiliate Sales $ 3,469,848 11 45days Note Note $ 153,075 2 Ltd. Foxconn Technology CZ Chimei Innolux Corporation " Purchases 413,544 23 " " " 928,790 1 S.R.O-Czech (Original name: Innolux Display Co., Ltd.) Fugion Material Technology Fu Ding Precision Component (Shenzhen) " " 1,331,292 49 90days " " 346,931 22 (Shenzhen) Limited Co., Ltd. Fulin Electronical Technology Fuxian Precision Industry (Kunshan) Co., " " 121,031 11 " " " - - (Changshu) Co., Ltd. Ltd. Ambit Microsystem (Shanghai) Co., Ltd. " " 858,268 80 " " " - - Huaian Fulitong Trading Co., Ltd. Fu Yu Electronical Technology (Huaian) Co., " Sales 102,967 17 30days " " 43,647 72 Ltd. Futaihua Industrial (Shenzhen) Hongfujin (Shenzhen) Industry Co., Ltd. " " 197,340 - 90days " " 170,405 - Limited " Best Leap Enterprises Limited " " 218,761,737 98 " " " 69,216,658 95 " FTP Technology Inc. " Purchases 2,767,717 1 " " " ( 1,830,159) ( 4) " FTC Technology Inc. " " 120,354 - " " " ( 40,206) - " Fuzhun Precision (Shenzhen) Industry Co., " " 326,810 - " " " ( 299,292) ( 1) Ltd. " IRIS World Enterprises Ltd. " " 2,495,984 1 " " " ( 1,295,425) ( 3) Fuhuajie Industrial (Shenzhen) Skilltop Limited " Sales 1,278,239 5 45days " " 2,266,411 24 Limited " Foxconn Image & Printing Product Pte. Ltd. " " 24,752,715 90 30days " " 7,211,604 76 " IRIS World Enterprises Ltd. " " 487,290 2 90 days " " ( 401,272) ( 13) Foxconn Precision Electronics IRIS World Enterprises Ltd. " " 161,048 3 " " " ( 85,273) (4) (Yantai) Co., Ltd. Foxconn Japan Ltd. Chimei Innolux Corporation " Purchases 692,628 29 " " " ( 189,701) ( 13) (Original name: Innolux Display Co., Ltd.) Premier Image Technology (China) Fuhonyang Precision Industrial (Shenzhen) " Sales 115,851 1 " " " 71,264 1 Ltd. Co., Ltd.
～75～ Difference with general Notes and accounts Transactions transactions receivable (payable) Relationship with Percentage of Percentage Company Counterparty the Company Purchases /sales Amount purchases / sales Terms Unit price Terms Balance of balance Note " Hongfujin Precision Industry (Wuhan) Co., " " 1,899,249 8 " " " 7,874 - Ltd. " Futaihua Industrial (Shenzhen) Limited " " 696,438 3 " " " 358,597 5 " Jumbo Rise Management Limited " " 17,819,405 79 " " " 4,483,038 66 Premier Image Technology (China) Foxconn MOEBG Industrial De Electronicos An affiliate Sales $ 477,507 2 " Note Note $ 271,154 4 Ltd. Ltda. –Brasil " Hon Fujin Precision Industry (Taiyuan) Co., " Purchases 106,932 1 " " " ( 102,374) ( 1) Ltd. " Pan International Industrial Corporation " " 138,928 1 " " " ( 100,653) ( 1) " Pan International Industry Co. Ltd. " " 469,170 2 " " " ( 281,242) ( 3) " IRIS World Enterprises Ltd. " " 143,977 1 " " " ( 92,703) ( 1) Note: The prices and terms to related parties were not significantly different from transaction with third parties. For other related party transactions, prices and terms were determined in accordance with mutual agreements. 9) Receivable from related parties in excess of $100,000 or over 20% of total contributed capital: please refer to information on significant transactions in Note 11(1) and the following disclosures.
Balance of Overdue receivables Allowance for receivable doubtful Relationship with from related Turnover Action adopted for Subsequent accounts Company Counterparty the company parties rate Amount overdue accounts collection provided Ambit Microsystems (Zhong shan) Corporation Unique Logistics Ltd. An affiliate $ 338,912 - $ - - $ 338,197 $ - Unique Logistics Ltd. Ambit Microsystems (Zhong shan) Corporation " 218,215 5.30 - - 201,303 - Ambit Microsystem (Shanghai) Co., Ltd. Amworld Microsystems (Shanghai) Ltd. " 302,910 5.86 - - - - " Foxway Precision Industry (Hangzhou) Co., Ltd. " 173,930 1.14 - - - - " Hongfujin Precision Electrons(Yantai) Co., Ltd. " 130,258 4.01 - - - - " AMB Logistics Ltd. " 1,789,038 - - - - - " Hongfutai Precision Electrons(Yantai) Co., Ltd. " 148,666 6.13 62,854 Subsequent collection 41,671 - FIH (Hong Kong) Limited Sutech Industry Inc. " 4,061,718 3.89 - - 1,195,981 - " Foxconn Reynosa S.A. De. C.V. " 757,784 3.61 - - 47,224 - " Foxconn Do Brasil Ind. E Comercio De Eletronicos " 168,796 4.13 - - 16,933 - Ltda. " Chi Mei Communication System ,Inc " 446,133 2.70 - - 10,965 - " FIH Europe Limited (Hungary) " 397,011 4.73 - - 100,119 - " Foxconn India PVT. Ltd. " 147,611 3.20 - - 12,468 - " Foxconn Precision Electronics (Langfang) Co., Ltd. " 950,410 3.13 - - 67,893 -
～76～ Balance of Overdue receivables Allowance for receivable doubtful Relationship with from related Turnover Action adopted for Subsequent accounts Company Counterparty the company parties rate Amount overdue accounts collection provided Shenzhen Fu Tai Hong Precision Industry Co., Ltd. FIH (Hong Kong) Limited " 1,711,802 7.03 - - 1,109,188 - " Futaijing Precision Electronics (Beijing) Co., Ltd. " 558,218 0.58 - - 3,814 - " Foxconn Precision Electronics (Langfang) Co., Ltd. " 1,575,624 1.44 - - 6,227 - " Hongfujin Precision Industry (Shenzhen) Co., Ltd. " 266,202 4.16 - - 14,738 - Foxconn Precision Component (Beijing) Co., Ltd. Futaijing Precision Electronics (Beijing) Co., Ltd. An affiliate $ 1,820,958 3.70 $ - - $ 789 $ - " FIH (Hong Kong) Limited " 114,512 - - - 114,512 - Foxconn Precision Electronics (Taiyuan) Co., Ltd. Foxconn Precision Electronics (Langfang) Co., Ltd " 314,731 2.32 -- 52,342 - " FIH (Hong Kong) Limited " 245,431 5.41 -- 235,175 - " Shenzhen Fu Tai Hong Precision Industry Co., Ltd. " 137,027 1.39 -- 5,869 - Futaijing Precision Electronics (Beijing) Co., Ltd. Chi Mei Communication System ,Inc " 170,470 4.90 -- 47,703 - " Foxconn Precision Electronics (Langfang) Co., Ltd " 159,907 5.03 -- 12,343 - Foxconn Precision Electronics (Langfang) Co., Ltd. Eliteday Enterprises Limited " 1,632,920 - -- 671,485 - . " Shenzhen Fu Tai Hong Precision Industry Co., Ltd. " 671,732 2.90 -- 24,978 - " Foxconn Precision Component (Beijing) Co., Ltd. " 255,068 1.94 -- 17,435 - " Futaijing Precision Electronics (Beijing) Co., Ltd. " 185,762 3.58 -- 27,043 - Eliteday Enterprises Limited FIH Europe Limited (Hungary) " 413,372 7.50 -- 32,242 - " Foxconn Reynosa SA. DE C.V. " 199,705 3.71 -- 5,958 - " Foxconn Do Brasil Ind. E Comercio De Eletronicos " 118,424 7.04 -- 3,397 - Ltda. Fujin Precision Industry (Shenzhen) Co., Ltd. Hongfujin Precision Industry (Shenzhen) Co., Ltd " 106,082 - -- 44,456 - Hongfujin Precision Industry (Shenzhen) Co., Ltd. Fu Ding Precision Component (Shenzhen) Co., Ltd. " 426,653 5.04 47,084 Subsequent collection 149,012 - " Honxun Electrical Industry (Hangzhou) Co., Ltd. " 457,335 2.69 163,195 " 199,224 - " Shenzhen Fu Tai Hong Precision Industry Co., Ltd. " 556,188 2.20 15,627 " 171,750 - " Foxconn Precision Electronics (Langfang) Co., Ltd " 173,210 2.54 546 " 34,483 - " Carston Ltd. " 193,247 3.53 - - - - " Heroic Legend Enterprises Ltd. " 212,892 - - - - - " Franklin Management Ltd. " 249,473 3.43 - - - - " Hongzhun Precision Tooling (Kunshan) Co., Ltd. " 114,455 4.16 5 Subsequent collection 288 - " Futaihua Industrial (Shenzhen) Limited " 2,416,203 3.09 5,199 " 135,897 - " Innocom Technology (Shenzhen) Co., Ltd. " 689,203 3.81 - - - - Fu Ding Precision Component (Shenzhen) Co., Ltd. Beyond Maximum Industrial Limited " 659,177 3.79 - - - Fuhong Precision Component (Shenzhen) Co., Ltd. Best Matrix Enterprises Ltd. " 185,315 0.09 - - - - Champ Tech Optical (Foshan) Corporation Premier Image Technology (China) Ltd. " 107,128 8.07 - - - -
～77～ Balance of Overdue receivables Allowance for receivable doubtful Relationship with from related Turnover Action adopted for Subsequent accounts Company Counterparty the company parties rate Amount overdue accounts collection provided Foxconn Electronic Industrial Development Foxconn (Kunshan) Computer Connector Co., Ltd. " 1,808,128 5.46 - - - - (Kunshan) Co., Ltd. Best Leap Enterprises Limited Fusing International Inc. Pte. Ltd. " 2,436,096 2.58 - - 463,925 - " Futaihua Industrial (Shenzhen) Limited " 287,547 1.78 35,187 - 3,643 - Best Leap Enterprises Limited Foxconn Technology Pte. Ltd. An affiliate $ 1,111,839 2.25 $ - - $ - $ - Skilltop Limited Foxconn Image & Printing Product Pte. Ltd. " 1,220,937 5.00 256,628 Subsequent collection 79,129 - Hongfutai Precision Electrons(Yantai) Co., Ltd. Yantaishi Fulitong International Trading Co., Ltd. " 1,100,632 2.23 249,391 " - - " Hongfujin Precision Industry (Yantai) Co., Ltd. " 778,501 3.38 35,502 " 35,502 - " Dragon Spirit Ind. Ltd. " 4,468,664 8.48 91,970 " 91,970 - " Universal Field International Limited " 22,162,320 4.94 23,266 " 23,266 - Foxconn CZ S.R.O-Czech Foxcinn Rus, LLC " 185,475 0.18 - - 698 - Fujin Precision Industrial (Jincheng) Co., Ltd. Hongfujin Precision Industry (Shenzhen) Co., Ltd. " 223,011 3.88 - - - - " Futaihua Industrial (Shenzhen) Limited " 500,278 3.37 - - - - " Foxconn Precision Electronics (Langfang) Co., Ltd. " 163,601 5.81 - - - - " Best Ever Industries Limited " 186,702 - - - - - Hongzhun Precision Tooling (Kunshan) Co., Ltd. Hongfujin Precision Industry (Shenzhen) Co., Ltd. " 414,555 0.80 340 Subsequent collection 81,452 - " Kangzun Electronic Industrial (Kunshan) Co., Ltd. 445,794 0.80 176,415 " 112,984 - " Foxconn (Kunshan) Computer Connector Co., Ltd. " 595,243 0.32 330,231 " 35,260 - " Foxconn Electronic Industrial Development " 911,339 0.57 130,857 " 116,260 - (Kunshan) Co., Ltd. Foxconn Electronics Inc. Beyond Maximum Industrial Ltd. " 158,816 1.85 - - - - Fuzhun Precision Tooling (Huaian) Co., Ltd. Foxconn (Kunshan) Computer Connector Co., Ltd. " 191,553 0.44 183,027 Subsequent collection - - " Foxconn Electronic Industrial " 158,678 2.48 78,510 " - - Development(Kunshan) Co., Ltd. " Fuyu Electronical Technology (Huaian) Co., Ltd. " 202,806 3.14 81,275 Subsequent collection - - Hongfujin Precision Industry (Wuhan) Co., Ltd. Top Step Enterprises Limited " 9,407,386 9.47 - - 3,067,605 - Hongfujin Precision Industry (Yantai) Co., Ltd. Competition Team Technology Pte. Ltd. " 297,089 3.00 134,721 - - - " Hongfutai Precision Electrons(Yantai) Co., Ltd " 471,852 4.56 - - 52,390 - " Full Profit International Limited-Samoa " 545,237 4.51 194,353 Subsequent collection 321,911 - " Universal Field International Limited " 4,220,843 8.99 797 " 4,220,821 - " Foxconn Technology Co., Ltd. " 8,111,247 8.09 168,837 " 5,640,633 - Universal Field International Limited Hongfutai Precision Electrons(Yantai) Co., Ltd. " 649,533 3.68 4,214 " 266,061 - " Hongfujin Precision Electrons(Yantai) Co., Ltd. " 18,274,672 0.02 26,019 " 9,291,350 -
～78～ Balance of Overdue receivables Allowance for receivable doubtful Relationship with from related Turnover Action adopted for Subsequent accounts Company Counterparty the company parties rate Amount overdue accounts collection provided Top Step Enterprises Limited Hongfujin Precision Industry (Wuhan) Co., Ltd. " 153,075 - - - - - Foxconn Technology CZ S.R.O-Czech Chimei Innolux Corporation " 928,790 3.02 714,458 Subsequent collectin - - (Original name: Innolux Display Co., Ltd. Fugion Material Technology (Shenzhen) Limited Fu Ding Precision Component (Shenzhen) Co., Ltd. " 346,931 4.00 346,931 " - - Futaihua Industrial (Shenzhen) Limited Hongfujin Precision Industry (Shenzhen) Co., Ltd. An affiliate $ 170,405 0.16 $ - - $ 11,787 $ - " Best Leap Enterprises Limited " 69,216,658 7.65 - - 43,296,487 - Fuhuajie Industrial (Shenzhen) Limited Skilltop Limited " 2,266,411 0.57 154,425 Subsequent collection - - " Foxconn Image & Printing Product Pte. Ltd. " 7,211,604 2.09 19,024 " - - Foxconn Precision Electronics (Yantai) Co., Ltd. FIH (Hong Kong) Limited " 298,399 - 31 " 31 - Premier Image Technology (China) Ltd. Futaihua Industrial (Shenzhen) Limited " 358,597 3.23 - - 205,978 - " Jumbo Rise Management Limited " 4,483,038 8.79 - - 2,735,210 - " Foxconn MOEBG Industria De Electronics " 271,154 4.82 - - 55,594 - Ltda.-Brazil
～79～ 10) Information on derivative transactions a) As of June 30, 2010, the information on derivative financial instruments of investee companies is as follows:
Contract amount Derivative financial instrument (in thousands) Maturity Book Value Fair Value Forward exchange contracts: BUY JPY/SELL BRL JPY 43,750 $ 194 $ 194 99.7.9 BRL 887 BUY JPY/SELL USD JPY 250,000 3,079 3,079 99.7.5~99.7.9 USD 2,727 BUY JPY/ SELL INR JPY 173,125 1,022 1,022 99.7.2~99.8.27 INR 89,488 BUY USD/ SELL BRL USD 20,000 2,537 2,537 99.7.1~99.8.13 BRL 36,278 BUY USD/ SELL INR USD 8,378 ( 2,663) ( 2,663) 99.7.2~99.10.1 INR 394,230 BUY USD/ SELL MXN USD 6,00099.7.16 3,280 3,280 MXN 75,760 BUY USD/ SELL EUR USD 5,64499.7.2~99.8.17 596 596 EUR 4,600 BUY EUR/ SELL INR EUR 1,60299.7.2~99.8.27 392 392 INR 91,271 BUY EUR/ SELL USD EUR 1,00099.7.1 ( 186) ( 186) USD 1,229 SELL EUR/ BUY HUF EUR 1,500 99.7.27 ( 1,152) ( 1,152) HUF 420,600 SELL USD/ BUY MXN USD 38,000 99.7.22~99.9.23 7,700 7,700 MXN 491,138 SELL USD/ BUY BRL USD 6,500 99.7.1~99.7.14 ( 935) ( 935) BRL 11,735 SELL EUR/ BUY USD EUR 18,200 99.7.1~99.10.21 24,145 24,145 USD 23,216 SELL RMB/ BUY USD RMB 409,121 99.7.6~99.8.11 8,053 8,053 USD 60,000 SELL JPY/ BUY USD JPY 1,700,00099.7.7~99.7.22 24,020 24,020 USD 18,466 SELL USD/ BUY VND USD 6,50099.7.9~99.12.17 4,577 4,577 VND 126,452,500 SELL USD/BUY JPY USD 6099.7.21 ( 53,905) ( 53,905) JPY 5,425 SELL RMB/ BUY EUR RMB 29,28299.72.2~99.7.23 1,270 1,270 EUR 3,500
b) Additional disclosure: As of June 30, 2010, the company recognized net gain of $16,431 on derivative transactions (including net gain of $22,024 on valuation of financial assets and liabilities on June 30, 2010).
～80～ (3)Disclosure of information on indirect investments in Mainland China 1)Information on investments in Mainland China Balance of Transactions during Balance of Ownership Investment income Profit remitted to Method of amount remitted Jan. 1 ~June 30, 2010 amount remitted percentage held (loss) recognized Book value of Taiwan during Name of investee in investment from Taiwan Remittance Remittance from Taiwan as of by the Company during Jan. 1~June. investment as of Jan. 1~ Mainland China Main activities of investee Capital (Note 1) as of Jan. 1, 2010 out in June 30, 2010 (Direct/indirect) 30, 2010 (Note 2) June. 30, 2010 June 30, 2010 Foxconn Precision Manufacturing of $ 2,211,920 (2) $ - $ - $ - $ - 71.13% $ 287,162 $ 16,216,316 $ - Component (Beijing) telecommunication cases (US$ 68,800 Co., Ltd. thousand) Fujin Precision Manufacturing and processing 1,686,268 (2)(3) 160,750 - - 160,750 100% 31,244 2,307,210 140,174 Industry of computer cases, (US$ 52,450 (US$ 5,000 (US$ 5,000 (US$ 4,360 (Shenzhen) Co., computer peripherals, etc. thousand) thousand) thousand) thousand) Ltd. Shenzhen Fu Tai Hong Manufacturing and marketing 5,739,418 (2) - - - - 71.13% ( 1,771,107) 13,416,569 - Precision Industry of computer cases, micro (US$178,520 Co., Ltd. ribbon connectors for thousand) terminals, etc. Foxconn Precision Manufacturing of connectors, 798,606 (2)(3) 96,450 - - 96,450 100% 4,026 1,293,722 - Component micro ribbon connectors for (US$ 24,840 (US$ 3,000 (US$ 3,000 (Shenzhen) Co., Ltd. terminals, thousand) thousand) thousand) micro-computers, mouse cables, monitor cables, etc. Honxun Electrical Manufacturing and marketing 4,076,620 (2) - - - - 71.13% 274,401 5,451,027 - Industry (Hangzhou) of computer cases, micro (US$126,800 Co., Ltd. ribbon connectors for thousand) terminals, etc. Hongzhun Precision Manufacturing and marketing 482,250 (2) - - - - 100% ( 568) 640,305 - Tooling (Shenzhen) of computer cases and (US$ 15,000 Co., Ltd. computer peripherals, etc. thousand) Foxconn Computer Manufacturing of connectors, 1,433,890 (2)(3) 160,750 - - 160,750 100% 994,029 5,299,667 229,551 Connectors micro ribbon connectors for (US$ 44,600 (US$ 5,000 (US$ 5,000 (US$ 7,140 (Kunshan) Co., Ltd. terminals, micro- thousand) thousand) thousand) thousand) computers, mouse cables, monitor cables, etc. Fu Ding Precision Manufacturing and marketing 1,446,750 (2) - - - - 100% 100,816 3,047,083 - Component of connectors, micro ribbon (US$ 45,000 (Shenzhen) Co., Ltd. connectors for terminals, thousand) etc. Hong Fujin Precision Manufacturing and marketing 5,433,350 (2) - - - - 100% 3,003,112 52,352,322 1,125,893 Industrial (Shenzhen) of computer case and (US$169,000 (US$ 35,020
～81～ Balance of Transactions during Balance of Ownership Investment income Profit remitted to Method of amount remitted Jan. 1 ~June 30, 2010 amount remitted percentage held (loss) recognized Book value of Taiwan during Name of investee in investment from Taiwan Remittance Remittance from Taiwan as of by the Company during Jan. 1~June. investment as of Jan. 1~ Mainland China Main activities of investee Capital (Note 1) as of Jan. 1, 2010 out in June 30, 2010 (Direct/indirect) 30, 2010 (Note 2) June. 30, 2010 June 30, 2010 Co., Ltd. computer peripherals, etc. thousand) thousand) Foxconn Electronic Manufacturing and marketing $ 2,186,200 (2) $ - $ - $ - $ - 100% $ 112,206 $ 3,125,333 $ Industrial of computer cases, micro (US$ 68,000 - Development ribbon connectors for thousand) (Kunshan) Co., Ltd. terminals, etc. Futaije Science & Manufacturing and design 385,800 (2) - - - - 100% 14,415 546,461 - Technology of computer components (US$ 12,000 Development keyboards, etc. thousand) (Shenzhen) Co., Ltd. Fuhon Precision Manufacturing and marketing 369,725 (2) - - - - 100% 75,213 1,194,889 69,766 Component of connectors, micro ribbon (US$ 11,500 (US$ 2,170 (Shenzhen) Co., Ltd. connectors for terminals, thousand) thousand) etc. Hongzhun Precision Manufacturing and marketing 2,764,900 (2) - - - - 100% 888,505 8,547,242 87,448 Tooling (Kunshan) of computer cases (US$ 86,000 (US$ 2,720 Co., Ltd. thousand) thousand) Kangzhun Precision Manufacturing and marketing 2,893,500 (2) - - - - 100% 27,365 6,806,413 - Tooling (Kunshan) of computer components, (US$ 90,000 Co., Ltd. computer peripherals, etc. thousand) Futaikang Precision Manufacturing and marketing 184,863 (2) - - - - 100% 6,542 266,189 - Computer (Shenzhen) of connectors, micro ribbon (US$ 5,750 Co., Ltd. connectors for terminals, thousand) etc. Fuxing Precision Manufacturing and marketing 192,900 (2) - - - - 100% - 163,500 - Component (Huaian) of switching hub and router (US$ 6,000 Co., Ltd. cases Thousand) Fujin Precision Manufacturing and marketing 6,526,450 (2) - - - - 100% 112,567 6,614,073 - Industrial (Jincheng) of computer cases (US$ 20,300 Co., Ltd. thousand) Honyeh Precision Manufacturing and marketing 186,470 (2) - - - - 100% ( 10,008) 315,621 46,618 Component of computer components (US$ 5,800 (US$ 1,450 (Kunshan) Co., Ltd. thousand) thousand) Fuhonyang Precision Manufacturing and marketing 578,700 (2) - - - - 100% 23,794 1,129,219 - Industrial (Shenzhen) of connectors, micro ribbon (US$ 18,000 Co., Ltd. connectors for terminals, thousand) computer cases, etc. Foxway Precision Manufacturing and marketing 401,875 (2) - - - - 100% ( 22,550 828,936 - Industry (Hangzhou) of router components (US$ 12,500 ) ～82～ Balance of Transactions during Balance of Ownership Investment income Profit remitted to Method of amount remitted Jan. 1 ~June 30, 2010 amount remitted percentage held (loss) recognized Book value of Taiwan during Name of investee in investment from Taiwan Remittance Remittance from Taiwan as of by the Company during Jan. 1~June. investment as of Jan. 1~ Mainland China Main activities of investee Capital (Note 1) as of Jan. 1, 2010 out in June 30, 2010 (Direct/indirect) 30, 2010 (Note 2) June. 30, 2010 June 30, 2010 Co., Ltd. thousand) Hongfutai Precision Manufacturing and marketing $ 4,372,400 (2) $ - $ - $ - $ - 100% $ 901,485 $ 13,195,210 $ - Electrons (Yantai) of auto digital signal (US$136,000 Co., Ltd. process device and thousand) components Ambit Microsystems Manufacturing and marketing 1,324,580 (2)(3) 787,675 - - 787,675 100% 320,895 2,621,455 - (Zhong shan) of power supplies (US$ 41,200 (US$ 24,500 (US$ 24,500 Corporation thousand) thousand) thousand) Ambit Microsystems Manufacturing and marketing 2,359,810 (2)(3) 1,478,900 - - 1,478,900 100% 218,814 6,458,857 - (Shanghai) Co., Ltd. of power supplies, modems (US$ 73,400 (US$ 46,000 (US$ 46,000 and ADSL devices thousand) thousand) thousand) Amlink (Shanghai) Manufacturing and marketing 643,000 (2)(3) 225,050 - - 225,050 44.81% 53,836 517,496 - Co., Ltd. of power supplies, modems (US$ 20,000 (US$ 7,000 (US$ 7,000 and ADSL devices thousand) thousand) thousand) Competition Media Manufacturing and marketing 1,157,400 (2) - - - - 100% 2,705 665,287 - (Shenzhen) Co., Ltd. of optical pickup head and (US$ 36,000 components of CD-ROM thousand) Fuxian Precision Manufacturing and marketing 4,501,000 (2) - - - - 100% ( 162,228 5,071,741 - Industry (Kunshan) of computer case (US$140,000 ) Co., Ltd. thousand) Dong Guan Hong Song Manufacturing and marketing 321,500 (2) - - - - 100% 19,494 176,129 - Precision of keypad and computer (US$ 10,000 Component Co., Ltd. Components thousand) Foxconn (Tianjin) Manufacturing and marketing 1,697,520 (2) - - - - 71.13% ( 84,200) 920,338 - Precision Industry of wireless phone and (US$52,800 Co., Ltd. components thousand) Fugion Material Manufacturing and marketing 118,955 (2) - - - - 70% 28,105 125,567 - Technology of potassium aurous (US$ 3,700 (Shenzhen) Limited cyanide thousand) Antec Automotive Manufacturing and marketing 144,997 (2) - - - - 100% 2,344 ( 42,494) - Electric System of automobile (US$ 4,510 (Kunshan) Co., Ltd. thousand) Liuzhou Antec Manufacturing and marketing 47,582 (2) - - - - 55% 468 10,624 -
～83～ Balance of Transactions during Balance of Ownership Investment income Profit remitted to Method of amount remitted Jan. 1 ~June 30, 2010 amount remitted percentage held (loss) recognized Book value of Taiwan during Name of investee in investment from Taiwan Remittance Remittance from Taiwan as of by the Company during Jan. 1~June. investment as of Jan. 1~ Mainland China Main activities of investee Capital (Note 1) as of Jan. 1, 2010 out in June 30, 2010 (Direct/indirect) 30, 2010 (Note 2) June. 30, 2010 June 30, 2010 Fangshen Electric of automobile (US$ 1,480 System Co., Ltd. thousand) Foxconn Precision Manufacturing and marketing 1,318,150 (2) $ 1,054,199 $ - $ - $ 1,054,199 100% ( $ 95,806) $ 867,805 $ - Electronics (Yantai) of telecommunication (US$ 41,000 (US$ 32,790 (US$ 32,790 Co., Ltd. peripherals thousand) thousand) thousand ) Premier Image Manufacturing and sale of 4,879,084 (2)(3) 20,898 - - 20,890 99.96% 522,650 11,911,800 - Technology (China) cameras. (US$ 151,760 (US$ 650 (US$ 650 Limited thousand) thousand) thousand) Fu Zhun Precision Designing, manufacturing and 2,128,330 (2) - - - - 100% 215,683 3,167,743 - Tooling (Huai an) marketing of computer (US$ 66,200 Co., Ltd. components thousand) Fu Yu Electronical Designing and marketing of 4,700,330 (2) - 643,000 - 643,000 100% 529,090 6,670,067 - Technology (Huaian) connectors and cables (US$146,200 (US$ 20,000 (US$ 20,000 Co., Ltd. thousand) thousand) thousand ) CJ Electric System Co., Manufacturing and marketing 70,730 (2) - - - - 50% 22,280 91,185 - Ltd. of automobile (US$ 2,200 thousand) Foxconn Precision Manufacturing and marketing 2,748,825 (2) - - - - 71.13% ( 82,239) 1,663,455 - Electronics (Taiyuan) of micro ribbon connectors (US$ 85,500 Co., Ltd. for terminals, etc. thousand) Hongfujin Precision Manufacturing and marketing 1,060,950 (2) - - - - 100% ( 24,112) 1,212,097 - Industry (Huizhou) of computer cases, router, (US$ 33,000 notebook, etc. thousand) Fukui Precision Manufacturing and marketing 3,382,180 (2) - - - - 42.87% 122,015 2,175,607 - Component of electronics devices and (US$105,200 (Shenzhen) Co., Ltd. cable thousand) Futaijing Precision Manufacturing and marketing 2,411,250 (2) - - - - 71.13% ( 42,068) 2,719,701 - Electronics (Beijing) of computer cases, micro (US$ 75,000 Co., Ltd. ribbon connectors for thousand) terminals, etc. Foxconn Precision Manufacturing and marketing 3,182,850 (2) - - - - 71.13% 720,512 6,501,954 - Electronics of cell phone and (US$ 99,000 (Langfang) Co., Ltd. components thousand) Foxconn(Tianjin) Manufacturing and marketing (Note 3) (2) ------Precision Industry of GSM, CDMA phone and ～84～ Balance of Transactions during Balance of Ownership Investment income Profit remitted to Method of amount remitted Jan. 1 ~June 30, 2010 amount remitted percentage held (loss) recognized Book value of Taiwan during Name of investee in investment from Taiwan Remittance Remittance from Taiwan as of by the Company during Jan. 1~June. investment as of Jan. 1~ Mainland China Main activities of investee Capital (Note 1) as of Jan. 1, 2010 out in June 30, 2010 (Direct/indirect) 30, 2010 (Note 2) June. 30, 2010 June 30, 2010 Co., Ltd. components Foxconn Good Field Manufacturing and marketing 30,221 (2) - - - - 40% 2,244 41,865 - Precision Industry of electronics calculator (US$ 940 (Dalian) Co., Ltd. and components thousand) FuMeng Electronical Manufacturing and marketing 257,200 (2) $ - $ - $ - $ - 100% $ 11,550 $ 597,766 $ - Technology (Huaian) of micro ribbon connectors (US$ 8,000 Co., Ltd. for terminals thousand) Hongfujin Precision Manufacturing and marketing 7,806,020 (2) - - - - 100% 737,810 8,057,764 - Industry (Wuhan) of computer and digital (US$242,800 Co., Ltd. camera components thousand) Amworld Manufacturing and marketing 546,550 (2) - - - - 100% 2,826 576,985 - Microsystems of switch supply and (US$ 17,000 (Shanghai) Ltd. modem thousand) Hongqunsheng Manufacturing and marketing 1,077,025 (2) - - - - 42.87% ( 27,406) 410,553 - Precision Electronics of printed circuit board (US$ 33,500 (Yingkou) Co., Ltd. thousand) Hongqisheng Precision Manufacturing and marketing 3,247,150 (2) - - - - 42.87% ( 58,854) 1,262,635 Electronics of electronics calculator (US$101,000 - (Qinhuangdao) Co., and component thousand) Ltd. Hongfujin Precision Manufacturing and marketing 1,639,650 (2) - - - - 100% 3,652,083 18,084,813 - Industry (Yantai) Co., of computer components, (US$ 51,000 Ltd. computer thousand) Foxconn (Nanjing) Manufacturing and marketing 321,500 (2) - - - - 71.13% ( 52,268) 218,818 - Communications Co., of handset and components (US$ 10,000 Ltd. thousand) Foxconn (Nanjing) Computer software, hardware 1,028,800 (2) - - - - 100% ( 39,490) 817,013 Software Co., Ltd. and other digital product (US$ 32,000 - thousand) Foxconn Backlight and antenna 257,200 (2) - - - - 100% 2 287,216 (Qinhuangdao) component. (US$ 8,000 - Technology Co., Ltd. thousand) Honghuasheng Print circuit board products 2,758,470 (2) - - - - 42.87% ( 27,406) 410,553 Precision Electronics manufacturing and sales (US$ 85,800 - (Yantai) Co., Ltd. thousand)
～85～ Balance of Transactions during Balance of Ownership Investment income Profit remitted to Method of amount remitted Jan. 1 ~June 30, 2010 amount remitted percentage held (loss) recognized Book value of Taiwan during Name of investee in investment from Taiwan Remittance Remittance from Taiwan as of by the Company during Jan. 1~June. investment as of Jan. 1~ Mainland China Main activities of investee Capital (Note 1) as of Jan. 1, 2010 out in June 30, 2010 (Direct/indirect) 30, 2010 (Note 2) June. 30, 2010 June 30, 2010 Fulin Electronical Manufacturing and marketing 1,752,175 (2) - - - - 100% ( 4,058) 1,722,895 Technology of computer components, (US$ 54,500 - (Changshu) Co., Ltd. computer thousand)
Fuyang Electronical Manufacturing and marketing 1,626,790 (2) $ - $ - $ - $ - 100% 2,371 $ 1,655,557 $ Technology of computer components, (US$ 50,600 - (Changshu) Co., Ltd. computer thousand) Fu Tai Kang Marketing of computer chassis 964,500 (2) - - - - 100% 11,795 1,098,670 - Electronics and metal stamping parts (US$ 30,000 Development (Yantai) thousand) Ltd. Hongfujin Precision Connector related business 385,800 (2) - - - - 100% 4,000 427,556 Industry (US$ 12,000 - (Qinhuangdao) Co., thousand) Ltd. Foxconn (Shenyang) Numeric control machine tool 1,763,106 (2) - - - - 69.23% 1,892 1,247,276 - precision Industry manufacturing (US$ 54,840 Co., Ltd. thousand) Hong Heng Sheng Print circuit board product 2,925,650 (2) - - - - 42.87% ( 34,803) 1,178,853 - Electronical manufacturing and sales (US$ 91,000 Technology (Huaian) thousand) Co., Ltd. Alibaba (China) Providing software and (Note 4) (2) ------Technology Co., Ltd. technology services Alibaba (China) Providing software and (Note 4) (2) ------Software Co., Ltd. technology services Alibaba (Shanghai) Providing software and (Note 4) (2) ------Technology Co., Ltd. technology services Beijing Sinya Online Providing software and (Note 4) (2) ------Information technology services Technology Co., Ltd. Hongfuqiang Precision Manufacturing and marketing 80,375 (2) - - - - 100% - 81,337 - Electronics (Yingkou) of computer components, (US$ 2,500 Co., Ltd. computer thousand) Fuding Electronical Manufacturing and marketing 1,832,550 (2) - - - - 100% - 1,514,531 Technology (Jiashan) of computer components, (US$ 57,000 - ～86～ Balance of Transactions during Balance of Ownership Investment income Profit remitted to Method of amount remitted Jan. 1 ~June 30, 2010 amount remitted percentage held (loss) recognized Book value of Taiwan during Name of investee in investment from Taiwan Remittance Remittance from Taiwan as of by the Company during Jan. 1~June. investment as of Jan. 1~ Mainland China Main activities of investee Capital (Note 1) as of Jan. 1, 2010 out in June 30, 2010 (Direct/indirect) 30, 2010 (Note 2) June. 30, 2010 June 30, 2010 Co., Ltd. computer thousand) Fuhuajie Industrial Manufacturing and marketing 3,697,250 (2) 964,500 2,572,000 - 3,536,500 100% ( 354,900) 3,151,693 (Shenzhen) Limited of computer components, (US$115,000 (US$ 30,000 (US$ 80,000 (US$ 110,000 - computer thousand) thousand) thousand) thousand)
GDS Software Computer software, hardware (Note5) (2) $ - $ - $ - $ - - $ - $ - $ - (Shenzhen) Co., Ltd. and other digital product Futaihua Industrial Manufacturing and marketing $ 4,951,100 (2) - 3,825,850 - 3,825,850 100% 1,439,682 19,340,313 - (Shenzhen) Limited of computer components, (US$154,000 (US$119,000 (US$ 119,000 computer thousand) thousand) thousand ) Dong Guan Eson Manufacturing and marketing 225,372 (2) - - - - 29.39% 690 66,273 - Precision Tooling of telecommunication cases (US$ 7,010 Co., Ltd. thousand) Kunshan Eson Manufacturing and marketing 964,822 (2) - - - - 29.39% 18,622 483,883 - Precision Engineering of electronic components (US$ 30,010 Co., Ltd. thousand) Wuxi XinGuan Metal Manufacturing and marketing 450,100 (2) - - - - 29.39% 10,080 455,052 Science & of plastic mould (US$ 14,000 - Technology Co., Ltd. thousand) Kunshan Eson Manufacturing and marketing 224,086 (2) - - - 9.7% 8,454 144,567 - Technology Inc. of computer components, (US$ 6,970 computer thousand) Yantai Jiray Electronic Manufacturing and marketing 165,894 (2) - - - - 19.1% 5,348 44,738 - Technology Co., Ltd. of monitoring device (US$ 5,160 thousand) Yantai Zheng Yi " 70,730 (2) - - - - 29.39% ( 1,160) 19,190 Precision Electronic (US$ 2,200 - Co., Ltd. thousand) Guangzhou OED Manufacturing and marketing 176,825 (2) - - - - 5.88% ( 1,428) 6,884 Technologies Co., of (US$ 5,500 - Ltd. mould and tooling thousand) MediaMarkt E-book key material and (Note 6) (2) ------(Shanghai) components manufacturing Commercial & and sales Trading Company Limited Honfujin Precision Manufacturing and marketing 1,339,048 (2) 1,339,048 - - 1,339,048 100% ( 61,889) 1,282,994 - ～87～ Balance of Transactions during Balance of Ownership Investment income Profit remitted to Method of amount remitted Jan. 1 ~June 30, 2010 amount remitted percentage held (loss) recognized Book value of Taiwan during Name of investee in investment from Taiwan Remittance Remittance from Taiwan as of by the Company during Jan. 1~June. investment as of Jan. 1~ Mainland China Main activities of investee Capital (Note 1) as of Jan. 1, 2010 out in June 30, 2010 (Direct/indirect) 30, 2010 (Note 2) June. 30, 2010 June 30, 2010 Electronics of computer chassis and (US$ 41,650 (US$ 41,650 (US$ 41,650 (Chongqing) Co., metal stamping parts thousand) thousand) thousand) Ltd.
System Integration Manufacturing and marketing (Note 7) (2) $ - $ - $ - $ - 100% ($ $ 1,282,994 $ Electronics of electronic components, 61,889) - (Hangzhou)Co.,Ltd. network communication equipment, high-end routers and high-end switches Champ Tech OpticalL Manufacturing and marketing $ 866,443 (2) - 1,079,919 - 1,079,919 100% 51,813 1,074,597 - (Foshan) Corporation of Optical Lens (US$ 26,950 (US$ 33,590 (US$ 33,590 thousand) thousand) thousand) Innovation (Beijing) Manufacturing and marketing (Note 8) (2) ------Software of computer components, Development Co., comput and Software Ltd. Development MediaMarkt Consulting Service (Note 9) (2) ------(Shanghai) Consulting Service Company Spreadcomm Software Development on 19,290 (2) - - - - 71.31% ( 1,501) 4,811 - Technology Corp Mobile Devices (US$ 600 thousand)
Accumulated amount wired out from Taiwan to mainland Investment amount Ceiling of investment China as of June 30, 2010 approved by FIC of MOEA amount of the Company NT$ 14,408,987 NT$ 132,115,924 (Note 10)
US$ 44,818 US$ 410,936
Note 1: The methods of remittance of investments to mainland China are as follows: (1) Company funds are remitted from Taiwan through an investee company located outside of Taiwan and mainland China.
～88～ (2) Investee company established by the Company and located outside of Taiwan and mainland China remits its own funds directly to the investee companies located in mainland China. (3) Investee company located outside of Taiwan and mainland China remits its own funds directly to the investee companies located in mainland China. (4) Directly investing in companies in mainland China. (5) Others. Note 2: The portions of transaction information with related parties were based on the financial statements of the company for the same period which was not reviewed by independent accountants. Note 3: The Company was approved by Investment Commission, MOEA of an investment of US$ 2,902 thousands in Tianjin Foxconn Precision Industry Co., Ltd., which hasn’t been established as of June 30, 2010. Note 4: The Company held indirectly 0.347% ownership of the Mainland China subsidiaries of Alibaba (China) Technology Co., Ltd., Alibaba (China) Software Co., Ltd., Alibaba (Shanghai) Technology Co., Ltd., and Beijing Sinya Online Information Technology Co., Ltd.. The investment amount of the Company approved by the Investment Commission of the Ministry of Economic Affairs in the above four indirect subsidiaries was US$372,179, US$18,905, US$1 and US$1, respectively. Note 5: The Company was approved by Investment Commission, MOEA of an investment of US$8,000 in GDS Software (Shenzhen) Co., Ltd. As of June 30, 2010, the funds have not been remitted. Note 6: The Company was approved by Investment Commission, MOEA of an investment of US$50,000 in Media Market (Shanghai) Commercial & Trading Company Limited. As of June 30, 2010, license for operation was acquired, where as the funds have not been remitted; there is no operating activities in substance. Note 7: The Company was approved by Investment Commission, MOEA of an investment of US$11,283 in System Integration Electronics (Hangzhou) Co., Ltd. As of June 30, 2010, the funds have not been remitted. Note 8: The Company was approved by Investment Commission, MOEA of an investment of US$26,600 in Innovation (Beijing) Software Development Co., Ltd. As of June 30, 2010, the funds have not been remitted Note 9: The Company was approved by Investment Commission, MOEA of an investment of US$8,750 in MediaMarkt (Shanghai) Consulting Service Company As of June 30, 2010, the funds have not been remitted Note10: Pursuant to the Jing-Shen-Zi Letter No. 09704604680 of the Ministry of Economic Affairs, R.O.C., dated August 29, 2008, as the Company has obtained the certificate of being qualified for operating headquarters, issued by the Industrial Development Bureau, MOEA, the ceiling amount of the investment in Mainland China is not applicable to the Company. 2) Significant transactions with investee in Mainland China: The Company subcontracted the processing of products to Foxconn (Far East) Ltd.’s subsidiaries located in Mainland China. All intercompany transactions were eliminated when preparing consolidated financial statements. Relationship with Transactions Difference with general transactions Ending the company Purchases / sales Amount Unit price Terms Balance Note Foxconn (Far East) Ltd. and Wholly-owned subsidiary Sales $ 25,959,910 Note Note $ 9,713,033 its subsidiaries and its subsidiaries Best Leap Enterprises Indirect investee company Purchases 213,032,080 " " ( 67,875,991) Limited accounted for under the equity method Foxconn (Far East) Ltd. and Wholly-owned subsidiary " 127,027,274 " " ( 37,566,954) its subsidiaries and its subsidiaries Universal Field International Indirect investee company " 103,862,795 " " ( 26,454,462) Limited accounted for under the equity method Jumbo Rise Management " " 17,783,482 " " ( 3,798,728) Limited Note: The prices and terms to related parties were not significantly different from transaction with third parties. For other related party transactions, prices and terms were determined in accordance with mutual agreements.
For the six-month periods ended June 30, 2009 For the six-month periods ended June 30, 2010 Processing Cost Prepayments Payable Processing Cost Prepayments Payable Heroic Legend Enterprises Ltd. $ 14,368,653 $ - $ 10,452,962 $ 13,412,385 $ - $ 7,573,565 Foxconn (Far East) Ltd., and subsidiaries 7,887,427 905,301 10,743,140 12,352,479 920,017 12,826,791 Success Rise Enterprises Ltd. 8,365,307 - - 10,639,375 - 5,335,784
～89～ Franklin Management Ltd. 10,665,720 - 9,565,800 5,744,765 - 11,224,860 Carston Ltd. 2,827,422 - 10,355,215 2,483,064 - 7,707,563 $ 44,114,529 $ 905,301 $ 41,208,117 $ 44,632,068 $ 920,017 $ 44,668,563
～90～ (4) The relationship and significant transactions between the Company and its subsidiaries For the six-month periods ended June 30, 2009 Description of transactions The percentage of total consolidated revenue or total Number (Note a) Name of company Name of counterparties Relationship (Note b) Account Amount Transaction terms consolidated assets (Note d) 0 Hon Hai Precision Industry Co., Foxconn (Far East) Ltd. and subsidiaries 1 Sales $ 22,533,211 Note c 3 Ltd. 0 " " 1 Accounts receivable 10,521,583 " 1 0 " " 1 Purchases 218,889,406 " 27 0 " " 1 Accounts payable 79,879,811 " 9 0 " " 1 Processing and 44,114,529 " 5 molding costs 0 " " 1 Accrued Expenses 41,208,117 5 0 " " 1 Other receivable 57,500,522 " 6 0 " Premier Image Technology (H.K.), Ltd. 1 Purchases 11,611,545 " 1 1 Ambit Microsystem (Shanghai) AMB Logistics Ltd. 3 Sales 10,908,866 " 6 Co., Ltd. 2 Hong Fujin Precision Industrial Heroic Legend Enterprises Ltd. 3 Subcontract revenue 10,960,798 " 1 (Shenzhen) Co., Ltd. 3 Hongfutai Precision Electronics Dragon Spirit Ind. Ltd. 3 Sales 20,700,388 " 3 (Yantai) Co., Ltd. 3 " Universal Field International Limited 3 " 38,478,317 5 4 Hongfujin Precision Industry " 3 Sales 27,255,871 " 3 (Yantai) Co., Ltd. 4 " " 3 Accounts receivable 10,303,173 1 5 Premier Image Technology Premier Image Technology (China) 3 " 12,136,964 " 1 (H.K.), Ltd. Limited 6 Futaihua Industrial (Shenzhen) Best Leap Enterprises Limited 3 Sales 100,459,099 " 12 Limited 6 " " 3 Accounts receivable 45,566,891 " 5 7 Shenzhen Fu Tai Hong Industry FIH (Hong Kong) Limited 3 Sales 39,481,532 " 5 Co., Ltd. 7 " " 3 Accounts receivable 14,727,418 " 2
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For the six-month periods ended June 30, 2010 Description of transactions The percentage of total consolidated revenue or total Number (Note a) Name of company Name of counterparties Relationship (Note b) Account Amount Transaction terms consolidated assets (Note d) 0 Hon Hai Precision Industry Co., Foxconn (Far East) Ltd. and subsidiaries 1 Sales $ 25,959,910 Note c 2 Ltd. 0 " " 1 Purchases 127,027,274 " 11 0 " " 1 Processing and 12,352,479 " 1 molding costs 0 " " 1 Accounts payable 37,566,954 " 3 0 " " 1 Accrued expense 12,826,791 " 1 0 " " 1 Other receivable 36,562,808 " 3 0 " Best Leap Enterprises Limited 1 Purchases 213,032,080 " 18 0 " " 1 Accounts payable 67,875,991 " 5 0 " Universal Field International Limited 1 Purchases 103,862,795 " 9 0 " " 1 Accounts payable 26,454,462 " 2 0 " Universal Field International Limited 1 Other receivable 46,691,584 " 4 Jumbo Rise Management Limited 1 Purchase 17,783,842 1 0 " Heroic Legend Enterprises Ltd. 1 Processing and 13,412,385 " 1 molding costs 0 " Futaihua Industrial (Shenzhen) Limited 1 Other receivable 54,327,354 " 4 1 Ambit Microsystem (Shanghai) AMB Logistics Ltd. 3 Sales 16,454,351 " 1 Co.,Ltd. 2 Hongfutai Precision Electronics Dragon Sprit Ind. Ltd. 3 Sales 18,451,550 " 2 (Yantai) Co., Ltd. 2 " Universal Field International Limited 3 " 67,372,160 " 6 2 " " 3 Accounts receivable 22,162,320 " 2 3 Hongfujin Precision Electronics " 3 Sales 37,854,097 " 3 (Yantai) Co., Ltd. 4 Futaihua Industrial (Shenzhen) Best Leap Enterprises Limited 3 " 218,761,737 " 18 Limited 4 " " 3 Accounts receivable 69,216,658 " 5 5 Fuhuajie Industrial (Shenzhen) Foxconn Image & Printing Product Pte. Sales 24,752,715 2 Limited Ltd. 6 Shenzhen Fu Tai Hong Industry FIH (Hong Kong) Limited 3 " 21,238,603 " 2 Co., Ltd. 7 Hongfujin Precision Industry Top Step Enterprises Limited 3 " 30,991,550 " 3 (Shenzhen) Co., Ltd
～92～ Description of transactions The percentage of total consolidated revenue or total
Number (Note a) Name of company Name of counterparties Relationship (Note b) Account Amount Transaction terms consolidated assets (Note d) 8 Premier Image Technology Jumbo Rise Management Limited 3 " $ 17,819,405 " 1 (China) Limited Note a: The information of transactions between the Company and the consolidated subsidiaries should be noted in “Number” column. 1. Number o represents the Company. 2. The consolidated subsidiaries are numbered in order from number 1. Note b: The transaction relationships with the counterparties are as follow: 1. The Company to the consolidated subsidiaries. 2. The consolidated subsidiaries to the Company. 3. The consolidated subsidiaries to another consolidated subsidiaries. Note c: The prices and terms to related parties were not significantly different from transaction with third parties. For other related party transactions, prices and terms were determined in accordance with mutual agreements. Note d: In calculating the ratio, the transaction amount is divided by consolidated total assets for balance sheet accounts and is divided by consolidated total revenues for income statement accounts. Note e: For balance sheet accounts, transactions exceeding 1% of the consolidated total assets should be disclosed; for income statement accounts, transactions exceeding 1% of the consolidated total revenue should be disclosed. All the transactions had been eliminated when preparing consolidated financial statement. Note f: The portions of transaction information with related parties were based on the financial statements of the company for the same period which was not reviewed by independent accountants. 12) In accordance to with R.O.C. FAS No.23, segement information is not applicable for interim financial statements.
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